News Guide Africa

Category: Technology

  • Analysts predict extended hard times for banks in Ghana

    Adnan Adams Mohammed

     

    A Financial data analysis firm, Bloomberg, has estimated that banks operating in Ghana have been hit by about US$1.4 billion impairment due the debt restructuring.

     

    Aside this loss, some financial analysts have predicted that banks should expect extended tough times as they foresee additional impairment losses of about ¢6.1 billion due to factors imported by the Domestic Debt Exchange Programme (DDEP).

     

    Despite this historical loss positions reported by banks operating West Africa’s second largest economy, the Ghana Association of Banks (GAB) has reechoed that banks in the country are in good standing with their financial position. The President of the GAB, in an interview last week said, the capital position of banks are strong, while there is enough liquidity in the banking system.

     

    “Even though banks appear to have been negatively impacted, the situation was anticipated, hence adequate measures were put in place to protect banks in the country”, John Awuah retorted. “As we speak, there is strong liquidity in the environment. I have not heard that anybody has gone to a bank and cannot get their money. The banking system has enough liquidity in the system.”

     

    Mr. Awuah noted that the strong liquidity in the financial system could be partly attributed to the decision by the Bank of Ghana’s monetary control management that hiked the policy rate fortnight ago to mop up excess funds in an effort to control inflation.

     

    He also pointed out that the Bank of Ghana has put in several measures to cushion commercial banks from shocks as a result of the debt exchange programme.

     

    “The central bank has put in measures to help banks to weather the storms where there are difficulties. The Bank of Ghana has given us time to rebuild our capital”, he said.

     

    He stated that the numerous measures in addition to the financial sector stability fund will help banks support the economic growth agenda by lending to businesses.

     

    Meanwhile, a recent assessment of financial statements of banks by Dr. Richmond Atuahene and K B Frimpong revealed that banks will lose additional ¢6 billion due to reduced coupon rate and the extension of the maturity period from five to 15 years.

     

    According to the liquidity gap analysis, the 23 banks would have generated positive cash flow of about ¢10.1 billion over the period, from the original coupon rate of 19.3% per annum.

     

    But following the implementation of Domestic Debt Exchange Programme (DDEP), the extension of maturity period and reduction of coupon rate will impact heavily on their earnings from investments in Government of Ghana Bonds.

     

    “This liquidity gap is a result of the drop in the average bond rate of 19.3% to weighted average rate of 9% per annum, thus leading to nominal negative liquidity gap of 10.3%. The liquidity gap is expected to get worse if the average customer deposit rate was around 10% per annum, but later declined to weighted average rate of 9% per annum”.

     

    “For example, Bank A with the bond value of ¢9,I06,452,000 and average coupon rate of 19.3% would have had cash flow of ¢1,821,290,000, but with the Domestic Debt Exchange Programme, the effective rate of 9% per annum will cause a drop in cash flow to ¢720,927,000, thus leading to liquidity gap of ¢1,100,363,000”, it added.

     

    To qualify for a $3.0 billion Balance of Payment support facility from the International Monetary Fund, Ghana had to restructure its local-currency and overseas debt to bring down the Debt-to-GDP ratio to below 70 percent. The public debt is estimated at GHC576 billion.

     

    The country has finished with the first of debt restructuring which was the DDEP. The DDEP contributed to some top banks recording their first loss.

     

    GCB Bank Plc, the country’s largest lender by assets, posted a GHC593.4 million ($50.5 million) net loss for the year to end-December, its first since 1993 when Bloomberg started maintaining data.

     

    Also, Standard Chartered Bank Ghana Ltd., the biggest by market value, reported a loss of 297.8 million cedis.

     

    The impairments prompted Guaranty Trust Holding Co., Nigeria’s largest bank by market value, to vow to slow lending and bond trading in Ghana.

     

    GCB Bank took a charge of 1.83 billion cedis after impairing its debt securities, while for Standard Chartered Bank Ghana the amount was GHC173 million.

     

    Ghana’s lenders were allowed a month’s extension to release full-year earnings.

     

    The nation’s debt rose after spending pressures from an energy crisis between 2013 and 2015 and a sweeping banking-sector cleanup in 2018 were compounded by shocks from the Covid-19 pandemic and Russia’s invasion of Ukraine.

     

    As part of the revamp, Ghana exchanged GHC87.8 billion of local notes that paid an average of 19%, with bonds returning as little as 8.35% — resulting in losses for financial institutions.

     

    The government has started discussions with international debt holders through the G-20 Common Platform Framework for debt respite as it seeks to finalise the IMF support programme.

     

    The IMF wants Ghana to bring its debt down to 55% of GDP by 2028. Before the government’s interventions, Debt-to-GDP had been projected to reach 109% by close of 2023.

  • ‘Currency Board’ will effectively address monetary management infractions – IEA

    ‘Currency Board’ will effectively address monetary management infractions – IEA

    Adnan Adams Mohammed

     

    As Ghana visage for a way out of its cyclical economic management mess, the government is advised to establish a ‘Currency Board (CB)’ to help in the monetary management process of the Bank of Ghana.

     

    The ‘Currency Board’, the Institute of Economic Affairs (IEA) believes will help stabilise the cedi and prevent instability in the economy in times of shocks. The Institute also to limit the Central Bank lending to the government

     

    These monetary control and management factors deficiencies have been the bane of Ghana’s economic management. According economists, the CB system has limited inflation, checks currency volatility and better position balance of payments.

     

     

     

    is pushing for the establishment of a Currency Board (CB) to limit the Central Bank lending to the government, a move it believes will stabilise the cedi and prevent instability in the economy in times of shocks.

     

    According to the institute, since

     

    “You see, a Currency Board (CB) is a rigid monetary management system that is hedged in strict rules, with little room for discretion. The CB does not lend to government and it covers its currency fully by foreign exchange”, Lead Researcher at the Intitute, Dr. John Kwakye, in a paper published and titled “Institutionalising Fiscal Discipline and Macroeconomic Stability for Sustained Growth in Ghana: The Constitutional Pathway” noted.

     

    “The CB system has limited inflation, the currency does not depreciate and balance of payments crises are rare. This is close to the system in our Francophone neighbours, who restrict their Central Bank lending to governments and provide adequate cover for their currency, the CFA.”

     

    IEA buttressed its points that, the Francophone countries system guarantees them low inflation and a stable currency, but “you have Ghana that has chosen an independent Central Bank to conduct discretionary monetary policy’.

     

    It also blamed the Central Bank of Ghana for some of the economic woes, saying, “The Central Bank provides significant lending to government and covers the cedi with limited foreign exchange (40% in the Act). No doubt we face perennial price and currency instability!”

     

    “It is for this reason that some of us have argued that if we continue to abuse policy discretion and pay a high price for it in terms of macroeconomic instability, then we better hedge our policies by rules; tie our economic managers hands, so that we can enjoy rules-driven macroeconomic stability!”, it added.

     

    Finally, the IEA said despite Ghana having rules such as the Public Financial Management Act, the Bank of Ghana Act and the Fiscal Responsibility Act, the rules have not work because of lack of political way.

     

    “Let me say that it is not that we have had no rules at all in fiscal and monetary management. In fact, I can mention a couple of them, such as the Public Financial Management Act, the Bank of Ghana Act, the Fiscal Responsibility Act and the relevant provisions in the 1992 Constitution, which represent attempts to introduce rules in our fiscal and monetary management system”.

     

    “However, there are serious questions regarding not only their enforcement but their effectiveness as well. And that is the reason we feel strongly about the need to give constitutional backing to some of these rules”, it concluded.

     

  • IEA takes on govt for snubbing fiscal adjustment but pursuing debt restructuring as advised by IMF

    Adnan Adams Mohammed

     

    The Institute of Economic Affairs (IEA) is dismayed at the snobbish attitude of government towards  the fiscal adjustment advice from the International Monetary Fund (IMF) in order to reach a debt sustainability level.

     

    The  government is only focusing its attention on the debt restructuring with less concentration on the fiscal adjustment, yet, both were advised by IMF, the Institute alarmed.

     

    Although the government has managed to force it way through to complete the Domestic Debt Exchange Programme, but IEA fears the government’s attempt to close it ears on any advise for it to cut down expenditure (especially on its appointees and unnecessary projects), could prolong the commitment and assurance of the Paris Club and G-20 Members to give an assurance for a debt restructuring.

     

    “I look at the language that the IMF is using in their communique. The IMF is saying that there should be a combination of fiscal adjustment and debt restructuring to get to the sustainability level. But it looks like our government is not prepared to do much of the fiscal adjustment which CSOs have made concrete proposals”, Director of Research at IEA, Dr. John Kwakye juxtaposed. “Such deliberate neglect for fiscal adjustments is the bane of the economy.”

     

    He added that a debt restructuring with fiscal discipline would not result in sustainable debt management and thereby advised government to implement the numerous fiscal adjustment proposals made by CSOs to help revive the economy.

     

    “This government since last year when it started negotiating with the Staff of IMF, keeps telling Ghanaians they are very close. But if you examine the situation carefully the date keeps changing”.

     

    Dr. Kwakye suggested that one of the reasons for the delay could be the signals sent by government, on the Finance Minister’s refusal to embark on fiscal adjustment.

     

    Meanwhile, IMF’s Africa Department Director, Abebe Selassie, has padded Ghana government at the back as he believe Ghana has taken the tough economic decisions needed to win a rescue package from the Fund.

     

    In a space of four months, the government has increased taxes and imposed losses on domestic investors, in attempt to meet IMF demands for the $3 billion loan. Currently on an informal talks with bilateral lenders, though it has dragged on.

     

    Ghana has “done all of the prior actions that were expected of them for the program,” Selassie said in an interview. “They’ve done a really, really difficult domestic debt restructuring exercise. The country now needs to get the resources required to support reserves.”

     

    Bilateral lenders, including China, are now expected to set up a committee to start formal negotiations with Ghana in the next few days. First on the committee’s agenda will be a written commitment to provide relief to the West African nation, paving the way for the loan from the IMF.

     

    “Provided we have the financing assurances, we would go to the board very quickly after that,” Selassie said. “So within the next three, four weeks. That’s the key hurdle for us.”

     

    The talks are taking place under the Group of 20’s so-called Common Framework, which expands the Paris Club of sovereign creditors to include China and other nations. Just under a third of Ghana’s bilateral debt, $1.9 billion, is owed to China. That is just a fraction of the nation’s 575.7 billion cedis ($50 billion) of public debt at the end of November.

     

    Five days after a surprise interest rate hike to a record 29.5% on March 27, parliament passed a bill to raise an additional 4 billion cedis ($353 million) in revenue this year. That was after a previous 250 basis points increase in value added tax to 15%.

     

    The fiscal measures and restructuring of cedi-denominated liabilities will help the West African economy lower its public debt to 71% of gross domestic product by 2028, Finance Minister Ken Ofori-Atta said in a presentation Thursday. The IMF has said it needs be on track to drop to 55% by that year to qualify for support. Before the government’s interventions, it had been projected to reach 109%.

     

    “There’ll be burden-sharing all around,” Ofori-Atta said. “If you join us in this, you really will help us build a robust economy and come back and be able to resume our partnership with you and the markets.”

     

    The adjustments and latest tax increases are taking a heavy toll on Ghanaians. Millions, like Esther Annan, a street vendor in the capital, Accra, have seen their living standards drop as inflation soars.

     

    The mother of six took out a micro loan to fund her cloth and bed-linen business in January but has now missed weekly payments after local demand dried up and interest rates soared.

     

    “I play cat-and-mouse games with the lenders because there is no money to pay them,” she said. “The interest on the loans has become so high.”

     

    Local lenders, which were the most exposed to the domestic debt, are now expected to skew credit to sectors that can readily pay while those needing it most miss out, said Richmond Atuahene, an analyst at Salman Partners and Financial Consult Ltd. in Accra.

     

    The latest tax increases are “an additional cost and if industry can no longer bear it, it will be compelled to cut costs, including labor and output,” said Humphrey Kwesi Ayim-Darke, president of the Association of Ghana Industries. “Small and medium-sized companies, manufacturing and agriculture are going to be hardest hit because of their high risk premium historically.”

     

    A slowdown in credit growth and an expected drop in consumer spending could decelerate economic expansion this year, according to three economists surveyed by Bloomberg.

     

    “The downside risks to the government’s 2.8% real GDP growth target for this year have increased on the back of the tightened monetary policy stance,” Mark Bohlund, a senior credit research analyst with REDD Intelligence, said.

     

  • Fitch, IEA discount gov’t use of COVID-19 and Russia/Ukraine war as excuse for economy woes

    Adnan Adams Mohammed

     

    Ghana’s economic collapse cannot solely be blamed on COVID-19 pandemic and the Russian/Ukraine war, Fitch Solutions has discounted government’s overused excuse.

     

    It explains that, even before these external shocks hit the global economy, Ghana’s debt was above the sustainable level as measured against the International Monetary Fund’s threshold of debt to Gross Domestic Product ratio of 70 percent and below.

     

    The international investors’ research firm argued that, Ghana went back to the international capital market in early 2021 in desperation for cash. This attracted investors to take advantage of the sweet rates Ghana was selling its Eurobonds, and led to investors oversubscribing Ghana’s bonds which later resulted in currency sell off, after which the country started witnessing symptoms of hiding chronic economic disease of escalating exchange rate and inflation since early 2022

     

    “I think the answer is, it’s been aggravated by the Covid-19 pandemic and the war in Ukraine. Those two are not the only cost to Ghana’s woes”, Senior Country Risk Analyst, Mike Kruiniger, responding to a question at a recent Sub Saharan Africa Macroeconomic Update event said. “Both external and internal shocks caused the macroeconomic imbalances in the country.”

     

    “Ghana’s debt servicing costs were already rising pretty rapidly prior to the pandemic with the government having to work on pretty large scale of spending projects including restructuring of the banking sector and providing free secondary education to everyone in Ghana”, he explained.

     

    Mr. Kruiniger also blamed the high borrowing on the international capital market as one of the country’s problems.

     

    “Ghana went back to the international capital market in early 2021, with this seamless desperation for cash. Investors started to flood the country which led the currency to sell off and after that, we’ve seen all the problems that Ghana has been facing since early 2022”.

     

    He concluded that though the Covid-19 and the Russian Ukraine war have contributed to Ghana’s crisis, they are not only the reasons behind Ghana’s economic challenges.

     

    Meanwhile, the Institute of Economic Affairs pointed that indiscipline in managing the country’s finances have caused the high fiscal deficits and consequently high inflation and currency instability, forcing innocent Ghanaians and businesses to pay for the mismanagement.

     

    The think-tank expressed it worry in a paper published and titled “Institutionalising Fiscal Discipline and Macroeconomic Stability for Sustained Growth in Ghana: The Constitutional Pathway.”

     

    Lead Researcher at the Intitute, Dr. John Kwakye, noted that Ghana has a long history of fiscal indiscipline and this is evident in its fiscal deficits being almost consistently higher than those of its peers in Africa.

     

    “Our deficits tend to escalate in election years when we elevate election-related spending. Then we borrow to finance the deficits and cause our public debt to escalate to unsustainable levels. We have been in that situation numerous times. Our debt reached the first crisis situation around 2004, when it ballooned to over 100% of GDP”.

     

    “We had to seek relief under the HIPC Initiative, which caused the debt-to-GDP ratio to drop to a sustainable level of 26% in 2006. Thereafter, we returned to our culture of fiscal indiscipline, which caused the debt to rise yet again. And today, the debt-to-GDP ratio is back to an unsustainable level of over 100%”, he explained.

     

    He added that the country must do everything possible to safeguard or institutionalise fiscal discipline under the constitution, else it will always record macroeconomic instability.

     

    Also, associated with the high fiscal deficits has been high inflation and currency instability, which the IEA called for immediate action.

     

    According to Dr. Kwakye, Ghana has had much higher inflation rates than its peers, adding, the cedi has experienced much higher depreciation over the years.

     

    Again, he said “government domestic borrowing to finance the deficits has elevated interest rates to levels that have crowded out the private sector, inhibiting investments and stifled economic growth. High fiscal deficits and the associated demand pressures have also spilled over to the external sector, leading to high current account deficits”.

     

    The economist opined that, prevalent fiscal indiscipline and its associated macroeconomic instability, and over-borrowing to spend on goods and services are what have taken the country to the IMF about 17 times.

     

    “We have been caught up in an unending cycle of high fiscal deficits, high interest rates, high inflation, high current account deficits, rapid exchange rate depreciation, and unstable growth. It is our prevalent fiscal indiscipline and associated macroeconomic instability and debt crises that have taken us to the IMF seventeen times”.

  • Banks losses due to DDEP may continue into 2024 – Finance Lecturer

    The loss position of banks in Ghana may continue into next year, a Senior Finance Lecturer at the University of Ghana Business School, Dr. Benjamine Amoah, has stated.

     

    According to him, the impact of the Domestic Debt Exchange on the broader economy has impacted negatively on the banks’ balance sheets.

     

    Banks in Ghana are said to have lost about ¢15 billion as a result of the impact of the DDEP on their operations.

     

    This has triggered the increase in the minimum capital requirement of the financial intermediaries. Indeed, banks, according to the Bank of Ghana have a maximum of four years, ending 2025, to restore the minimum paid-up capital.

     

    Speaking to Joy Business, Dr. Amoah said even without the Domestic Debt Exchange Programme, banks will have still shore up their capital because of exchange rate losses.

     

    “It is simply the reflection of what has happened in the economy over the past year or so and the fact that these banks also operate within the economy”.

     

    “So whatever happens in the bigger economy would definitely reflect on the performance of the banks and to a large extent on the balance sheets of these banks”, he stressed.

     

    According to him, it is not surprising banks are reporting losses for 2022.

     

    “It is not surprising that the banks are reporting some of these non-performance for this particularly year and maybe hopefully next year because we are still not at the end of these challenges”.

     

    According to the Bank of Ghana, derecognition losses emanating from the Domestic Debt Exchange Programme will be spread equally over a period of four years, effective 2022, for the purposes of Capital Adequacy Ratio (CAR) computation.

     

    The International Financial Reporting Standards (IFRS) states that derecognition refers to the removal of an asset or liability (or a portion thereof) from an entity’s balance sheet.

  • ‘Currency Board’ will effectively address monetary management infractions – IEA

    ‘Currency Board’ will effectively address monetary management infractions – IEA

    Adnan Adams Mohaammed

     

    As Ghana visage for a way out of its cyclical economic management mess, the government is advised to establish a ‘Currency Board (CB)’ to help in the monetary management process of the Bank of Ghana.

     

    The ‘Currency Board’, the Institute of Economic Affairs (IEA) believes will help stabilise the cedi and prevent instability in the economy in times of shocks. The Institute also think it will help to limit the Central Bank lending to the government

     

    These monetary control and management factors deficiencies have been the bane of Ghana’s economic management. According economists, the CB system has limited inflation, checks currency volatility and better position balance of payments.

     

    “You see, a Currency Board (CB) is a rigid monetary management system that is hedged in strict rules, with little room for discretion. The CB does not lend to government and it covers its currency fully by foreign exchange”, Lead Researcher at the Intitute, Dr. John Kwakye, in a paper published and titled “Institutionalising Fiscal Discipline and Macroeconomic Stability for Sustained Growth in Ghana: The Constitutional Pathway” noted.

     

    “The CB system has limited inflation, the currency does not depreciate and balance of payments crises are rare. This is close to the system in our Francophone neighbours, who restrict their Central Bank lending to governments and provide adequate cover for their currency, the CFA.”

     

    IEA buttressed its points that, the Francophone countries system guarantees them low inflation and a stable currency, but “you have Ghana that has chosen an independent Central Bank to conduct discretionary monetary policy’.

     

    It also blamed the Central Bank of Ghana for some of the economic woes, saying, “The Central Bank provides significant lending to government and covers the cedi with limited foreign exchange (40% in the Act). No doubt we face perennial price and currency instability!”

     

    “It is for this reason that some of us have argued that if we continue to abuse policy discretion and pay a high price for it in terms of macroeconomic instability, then we better hedge our policies by rules; tie our economic managers hands, so that we can enjoy rules-driven macroeconomic stability!”, it added.

     

    Finally, the IEA said despite Ghana having rules such as the Public Financial Management Act, the Bank of Ghana Act and the Fiscal Responsibility Act, the rules have not work because of lack of political way.

     

    “Let me say that it is not that we have had no rules at all in fiscal and monetary management. In fact, I can mention a couple of them, such as the Public Financial Management Act, the Bank of Ghana Act, the Fiscal Responsibility Act and the relevant provisions in the 1992 Constitution, which represent attempts to introduce rules in our fiscal and monetary management system”.

     

    “However, there are serious questions regarding not only their enforcement but their effectiveness as well. And that is the reason we feel strongly about the need to give constitutional backing to some of these rules”, it concluded.

     

  • Deloitte’s free consultancy to gov’t on achieving economic sovereignty

    Deloitte’s free consultancy to gov’t on achieving economic sovereignty

    Adnan Adams Mohammed

     

    Deloitte Ghana has recommended to government five key ways to achieve economic sovereignty.

     

    Among others, the accounting and auditing firm listed; increasing the tax net through digitalization, investing borrowed funds wisely to expand the productive capacity of the economy, tackling corruption, domesticating the economy and leveraging on the African Continental Free Trade Agreement.

     

    Deloitte Ghana has said it is committed to sharing insights and best practices that can help Ghana and the broader region navigate these complex issues and achieve the growth objectives.

     

    “By collaborating with industry leaders, policymakers, and other stakeholders, we can build a more resilient, inclusive, and sustainable future for all, the Managing Country Partner, Daniel Kwadwo Owusu noted at the launch of the 2023 Ghana CEO Network. “As a Knowledge Partner, Deloitte is proud to bring our expertise in these areas to the table”.

     

    He said the theme for this year’s event “Sustainable corporate governance, digital industrial transformation, and economic sovereignty”are key to unlocking new opportunities for growth and prosperity.

     

    “Through our partnership with the CEO Network, we look forward to engaging in meaningful dialogue with leaders from the private, public sectors, and civil society”, he added.

     

    He affirmed Deloitte’s commitment to being a responsible and impactful corporate citizen. We are led by our purpose of making an impact that matters.

     

    Also, Group Chief Executive Officer of Margins, Moses Kwesi Baiden Junior, for his part said the topic for this year’s event ‘economic sovereignty’ is important, especially considering the growing interdependence of the world’s economies, cultures and populations fostered by cross-border trade in goods, people, and technology.

     

    “We are currently experiencing some of the adverse effects of that economic interdependence exacerbated by the COVID-19 pandemic and the conflict in Ukraine. Business owners are grappling with the impact of supply shocks and high inflation rates whilst consumers are discouraged by the reduced purchasing power of the Ghana cedi. These are indeed difficult times; but as the quote says, what doesn’t kill us, makes us stronger. In every crisis, there is an opportunity; but to resolve a national crisis, there must be collaboration across sectors – that is what this year’s CEO summit is aiming to do – facilitate collaborative solutions”, he added.

     

    He explained that “as we aspire to attain economic freedom, we must first audit our resources – land, sea, air, and space and reindustrialize our supply chains to reduce our current dependence on foreign supply chains. The truth is the African continent has the manpower and the raw materials required to not only compete globally but to dominate. The problem is, we surrender our sovereignty by exporting our raw materials at low prices for the value to be added outside of Africa”.

     

    He furthered that Ghana has the prerequisites for guaranteeing sovereignty, but need to close its technology gaps to claim it.

     

    “To enable this business environment, the partnership between the public and the private sectors must be strong; with the public sector creating the appropriate macro-economic environment through policy design and implementation and working with the private sector to develop new capabilities and capacities, influence change technology, improve operational efficiency to increase the value of our assets”, he added.

  • Rising debt levels could worsen – World Bank

    Rising debt levels could worsen – World Bank

     

    The World Bank has said debt levels and vulnerabilities which remain high could worsen, especially for countries that have lost access to the credit market and are in or at risk of debt distress.

     

    If not addressed, it stressed that debt dynamics could escalate into a full-blown crisis, setting countries even further back.

     

    “The international community needs to find more adequate ways to speed up debt treatments. The current resolution mechanisms need to be strengthened so that they can effectively address a potential debt crisis, and additional instruments may need to be set in motion”,  the World Bank’s April 2023 Africa Pulse Report has noted.

     

    However, the Bank has urged African economies including Ghana to increasingly rely on their own policy reforms and domestic space for action in three areas.

     

    “First, restoring macroeconomic stability is essential for growth. Raising interest rates and avoiding policy conflicts that reduce the effectiveness of monetary transmission (say, fiscal dominance, and foreign exchange distortions) are crucial to reduce inflation to target levels.”

     

    “Second, structural reforms that foster private investment should be at the top of the pro-growth policy agenda of countries in the region. A premium should be put on policy measures that boost long-term competitiveness—including actions to improve market contestability and promote a sound regulatory framework”, it explained.

     

    “Third, African policy makers need to seize the opportunities that are available to them during the low carbon transition”, it concluded.

     

  • Gross Int’l Reserves fall to US$5.9bn

    The Bank of Ghana has said Ghana’s gross international reserves fell to US$5.9 billion as of the end of February 2023.

     

    It is enough to provide import cover for 2.8 months, the Governor, Dr Ernest Addison, told journalists at the central bank’s Monetary Policy Committee meeting.

     

    He said: “For the year 2022, the overall balance of payments recorded a deficit of US$3.6 billion”, noting: “The capital and financial account recorded a net outflow of US$2.1 billion (2.9 percent of GDP), mainly on account of lower FDI flows and significant portfolio reversals”.

     

    These, Dr Addison noted, together with the current account deficit of US$1.5 billion (2.1 per cent of GDP), resulted in the deficit of the overall balance”.

     

    “As a result, Gross International Reserves for 2022 declined by US$3.5 billion to US$6.2 billion. Net International Reserves, which adjusts Gross reserves for the Heritage and Stabilization funds as well as other encumbered funds also declined by US$3.7 billion to settle at US$2.4 billion by December 2022”, he reported.

     

    Dr Addison indicated: “Gross International Reserves further declined to US$5.9 billion at the end of February 2023, providing cover for 2.8 months of imports of goods and services. However, Net International Reserves improved to US$2.6 billion, reflecting a slight decline in encumbered funds”.

     

  • Ghana’s inflationary trend to improve as global price eases

    Ghana’s inflationary trend to improve as global price eases

    Adnan Adams Mohammed

     

    As global prices of food and energy ease, Ghanaians are likely to witness a positive improvement in its inflationary trends.

     

    Ease in prices could have a trickle-down effect on Ghana’s economy, the Bank of Ghana Governor has said.

     

    In spite of the emerging risks to global financial stability, central banks in major advanced economies have demonstrated a strong commitment to containing underlying inflationary pressures with sustained policy rate hikes, albeit, at lower rates than earlier anticipated”.

     

    “Global inflation is easing as food and energy prices moderate due to weakened global demand, improved supply of goods, and continued monetary policy tightening”, Governor Dr Ernest Addison said at its recent Monetary Policy Committee meeting held in Accra last week.

     

    “Global financing conditions have eased slightly, reflecting changing market expectations regarding the pace of policy tightening”.

     

    The US dollar index initially firmed up amid rising demand for safe-haven currencies following the collapse of Silicon Valley Bank and Signature Bank, but so far, swift regulatory action and assurances to contain contagion risks, combined with decisions to boost dollar liquidity somewhat eased market concerns about a wider banking and financial crisis.

     

    “The committee was of the view that the ease in price pressures abroad would likely impact positively on Ghana’s domestic inflation profile”, he reported.

     

    On the other hand, he said “the committee noted that the domestic economy still faces relatively tight global financing conditions, emerging risks in the global financial system, and heightened uncertainty about the global economic outlook”.

     

    “The effects of these on the domestic economy could be amplified by inherent vulnerabilities, including structural excess liquidity following the DDEP, and the widening negative output gap”, he added.