- The second wave of the Pandemic has led to a recalculation of the economic growth projections of the Ghanian economy pointing to a downward trend reflecting the fall in the global demand and disruptions to international supply chains resulting in a drop in the export revenue.
- Rising stock market, falling interest rates, and the stable currency cedi against the U S dollar is contrary to the prevailing trends.
The second wave of the Pandemic, has led to a recalculation of the economic growth projections of the Ghanian economy pointing to a downward trend reflecting the fall in the global demand and disruptions to international supply chains resulting in a drop in the export revenue.
However, one a surprising trend is the reaction of the country’s financial markets. Rising stock market, falling interest rates and the stable currency cedi against the U S dollar is contrary to the prevailing trends. The prudent monetary policy by the Bank of Ghana, along with sensible fiscal deficit financing strategy by the Ministry of Finance has kept the lending rates low.
The cedi exchange rate is being kept stable due to lower imports, and a narrowing of the current account deficit. Sufficient quantities of Forex is also available as the country has high gross international reserves and improved price discovery through the Bank of Ghana’s regular forward foreign exchange auctions. The central bank’s monetary policy helped to keep the Interest rates down. The stable exchange rates, low-interest rates and three successive years of falling equity prices have led to a rise in the stock market. The local food prices have also remained stable, another factor that determines inflation.
After enjoying relative stability in 2020, the Cedi has improved further since the beginning of 2021. Some experts even think that cedi could appreciate even further soon, especially with a record large-sized Eurobond issuance scheduled in the next few weeks. Ghana’s gross International Reserves is around US$8 billion. With its planned imminent Eurobond issuance of up to US$5 billion successful it is expected to touch US$9.9 billion which could lead to a marginal appreciation of the cedi.
