• GHS1.2 billion raised from Contingency Fund to fight COVID-19
• Yields on short-dated Treasury bills slashed significantly.
• The GSE ended in the red on investors' risk aversion.
• The Ghana Cedi depreciated against all 3 major trading currencies.
• Gold upsurged on heightened global uncertainties.

Macroeconomic update

GHS1.2 billion raised from Contingency Fund to fight COVID-19

The Government of Ghana, through the ministry of finance, has secured the approval of Ghana’s parliament to access a total of GHS1.2 billion from the contingency fund. This is for purposes of financing various programmes outlined by the Government in the bid of mitigating and eradicating the deadly virus – COVID-19. The contingency fund which was set up by a constitutional instrument (i.e. article 27 of the first republican constitution, 1960) under the presidency of Dr. Kwame Nkrumah was for the purposes of financing expenses related to urgent or unforeseen occurrences not having any provisions in a given year’s budget.

On the back of this, the GHS1.2 billion raised from the contingency fund will be used in financing the provision of food and water for households; reliefs for health sector workers and soft loans for businesses largely those within the micro, small and medium-size. Government envisage spending about GHS600 million to support business in the aforementioned category to produce relevant outputs to address the pandemic. Expenditure on Food for the vulnerable who will be negatively affected is estimated to be GHS280 million. Government is expected to spend another GHS200 million in the provision of water and sanitation and GHS40 million expected to be channelled into the National Buffer Stock Company. The funds are also expected to cover expenditures on tax waivers for health staff and cost of transportation for health workers within this period.

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

Yields on the Government of Ghana treasury securities continued to witnessed declines with the yield on the 91-Day easing by 56 basis points to 13.88 percent last Friday. Interest rates on the 182-Day and 364-Day T-Bills, similarly, dropped by 82 basis points and 86 basis points to settle at 14.13 percent and 16.79 percent respectively. Yields on the Government of Ghana treasury notes and bonds were, however, unaltered as they were not scheduled for the week’s auction.

Government accepted all the GHS1.63 billion bids tendered by investors at the week's auction. This far exceeded the GHS488.18 million accepted at the previous week’s auction and outpaced the week's target of GHS1.10 billion. The 91-Day T-Bill was the most bids accepted by the Government constituting 62.61 percent of the bids raised. Government intends to raise an amount of GHS677.00 million from the sale of the 91-Day and182-Day T Bills at the next auction.

The normality of the yield curve was sustained as moderation witnessed on the short-dated treasury securities were marginal and unable to alter the curve. The downtrend is expected to continue further due to strong willingness of Government and policy makers to deepen indigenous production which are tailored at addressing the COVID-19 pandemic. The expected downtrend in the midst of policy rate cut from 16 percent to 14.5 percent, commitment by the central bank to ensure cheaper credit lending by finance houses, coupled with other fiscal policy measures adopted by the Ministry of Finance, will deepen private sector investments.

Ghana Stock Exchange

The Accra Bourse ended in the red as investors’ risk aversion extended into the trading week resulting in selling pressures in some blue-chip companies. Ill-sentiment emanating from the COVID-19 pandemic and fears of economic recession across the globe negatively affected market outturn in the week under review. At the close of the truncated week, the GSE Composite Index dropped by 37 basis points to an index level of 2,135.24 points, corresponding to a year-to-date loss of 5.40 percent. The GSE Financial Stocks Index, similarly, dipped by 76 basis points to settle at 1,880.01 points, reflecting a year-to-date loss of 6.91 percent. 

Market turnout realized a total of 319,3771 shares valued at GHS147,203.23 million exchanging hands. This represents 42.97 percent reduction from the previous week’s traded volume of 0.56 million valued at GHS1.52 million. Ecobank Transnational Incorporated ad MTN Ghana Ltd were the most actively traded stocks, they jointly accounted for 70.74 percent share of the total shares that exchanged hands in the week under review. Market capitalization also dwindled by 0.44 percent to settle at GHS55,567.30 million, on account of the selling pressure.

Stock Price Movements

At the pairing of the week’s opening and closing prices, no advancer was recorded but two equities shed prices. CAL Bank Ltd and Ecobank Transnational Incorporated each dropped by a pesewa to end the week’s trade at 82 pesewas and 7 pesewas per share respectively.

Currency Market

Source: Bank of Ghana 09.04.2020

The Ghana cedi recorded another round of depreciation against all the three major trading currencies. The US dollar dimmed its outlook on the international forex market after labour market data came in much disappointed as the COVID-19 take a toll on economic activities in the US. Unemployment benefit claims hit the 6 million brackets for the second consecutive week as most companies halted their operations in attempt to stem the spread of the virus. On account of this, the US Fed rolled another monetary intervention of scaling up economic activities by giving out a $2.3 trillion to business within the local governments and small and mid-sized sectors. Despite this, the US dollar advanced by 0.81 percent to exchange at GHS5.51. The year-to-date depreciation of the cedi thus dropped to 0.51 percent.

The British pound advanced on the international currency market as investor reduced demand of the dollar to the pound sterling. The records of high COVID-19 cases and death in the US dimmed investors sentiment to ignore weak economic data from the UK. GDP growth for the three months to February 2020 missed a forecast of 0.2 percent as it dropped to 0.1 percent and difficulty of the UK Government in raising adequate funds from its bond market to fight the COVID-19, resorting to its central bank. The British pound thus recorded a weekly appreciation of 2.60 percent as it traded at GHS6.87 on the interbank currency market. The year-to-date depreciation of the cedi thus narrowed to 6.58 percent last Friday.

The Euro ended in the positive territory on the international currency market spurred by the persistent push for fiscal stimulus package to mitigate the negative impact of the pandemic. Finance ministers from the bloc are still considering of whether to issue stimulus packages, after earlier failed attempts, with some countries; Austria and Denmark threatening to leave the bloc is not agreed to. The positive closure of the euro was also supported by the surprise turnout of Germany’s factory data as it only contracted by 1.4 percent in February against an expectation of 1.9 percent contraction. The Euro thus posted a weekly appreciation of 2.14 percent to exchange at GHS6.03 on the interbank currency market. The year-to-date depreciation of the cedi thus reduced to 3.10 percent. 

International Markets

The US equity market edged lower as the release of disappointing employment data amid rising cases of covid-19 sparked fears of an economic recession. The US economy posted job losses of 701,000 in March and unemployment rate jumped to 4.4 percent in March from 3.5 percent in February on account of prolonged lockdown measures to curb the spread of the novel virus. Stocks within the Utilities, Telecoms and Financial sectors were the worst hit with the S&P 500 declining by 2.08 percent to settle at 2,488.65 points. The Dow Jones Industry Average also shed 2.70 percent to close at an index level of 21,052.53 points.

The London Stock Exchange closed in the red following downbeat readings from the manufacturing sector which weighed on investors’ risk-taking sentiments. The seasonally adjusted services PMI contracted steeply to 34.5 in March, below the previous outturn of 53.2 in February owing to restrictive measure enforced to combat the covid-19. The FTSE 100 thus posted a week-on-week loss of 1.29 percent to end the week’s trading at 5,395.50 points.

The Japanese Stock Exchange sank lower on heightened speculations of a lockdown in Japan as reported cases of the coronavirus passed the 1,000 mark. Investors thus sold off risky assets as they braced for a possible disruption in economic activities and shutdown in the wake of the covid-19 spread. The Nikkei 225 slipped by 8.09 percent to settle at an index level of 17,820.19 points.

The African equity markets recorded mixed outturns in the week under review. The Johannesburg All Share Index advanced by 3.85 percent to settle at 44,598.7 points. Similarly, the Nairobi All Share Index upturned by 8.94 percent after the week’s trade to settle at 138.68 points. The Nigerian All Share Index, on the downside, dipped by 3.51 percent to settle at 21,094.62 points.

Source:www.bloomberg.com, & www.investing.com

Brent crude oil failed to sustain its recovery in the week under review, owing to international disagreement and the reluctance of the US to join in the debate of Russia and Saudi Arabia on whether to cut production by about 10-15 million barrels. This weighed on the energy commodity in recent times has been hit by the global demand fall. Brent crude oil thus shed 16 cents to settle at $33.95 per barrel.

Gold sustained its surge on the international commodities market as it continues to benefit from the heightened uncertainties surrounding the COVID-19 pandemic. Fears about when global economy will recover after the pandemic and low interest rates policies adopted by various central banks has however, boosted the outlook of the yellow metal. Gold added $67.95 to close the week’s trade at $1,713.65 per ounce.

Cocoa advanced as the global traveling restrictions hindered the availability of the soft crop on the international commodities market. Ivory Coast which is projected to record higher yields as favourable climatic conditions returns is, however, unlikely to increase supply on the global market due to the fast spreading of the COVID-19. Cocoa thus gained $88.00 to trade at $2,352.00 per metric tonne.

Coffee closed the week’s trade in the gains as lower supplies from Latin America – Brazil and Colombia created demand pressure on the international commodities market. Poor climatic conditions in both Brazil and Colombia limited the availability of the soft crop on the global market. Coffee thus gained 5 cents to trade at $1.20 per pound.