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The government has announced that it is intensifying the Gold for Oil and Gold for Reserves programmes, and fast-tracking fiscal consolidation processes within the economy among a raft of measures intended to stabilise the Ghana Cedi.
Other interventions intended to shore up the local currency, which has depreciated by 14 per cent against the US dollar this year alone, include the government’s expected receipt of a combined $2.3 billion from its development partners.
Addressing the media in Accra last Friday at the Monthly Economic Update Series, the Minister of Finance, Dr Mohammed Amin Adam, said but for the recent pressures, the local currency had been largely stable, with the depreciation of the cedi against the US dollar halving from 54.2 per cent at the end of November 2022 to 27.8 per cent at the end of December 2023.
He said the cedi’s stability had continued into 2024, with a cumulative depreciation of 14.2 per cent as of May 20, compared to 20.7 per cent recorded in the same period in 2023.
“We expect the cedi’s stability to improve into the medium term as we complete debt restructuring, make more progress on fiscal consolidation and improve our reserves over the medium term.
“The recent pressures we are observing on the cedi is largely on the back of the strengthening of the US dollar against major trading currencies, seasonal forex demand, including elevated demand from corporate institutions, payment to contractors and independent power producers; high cedi liquidity and speculation,” the minister said.
As part of measures to address the depreciation of the currency, he said the government was fast-tracking the fiscal consolidation processes through rationalisation of spending and enhancement of revenue mobilisation.
The Ghana cedi is in a record-breaking weakening cycle, depreciating 14 per cent against the dollar this year, fuelled partly by foreign exchange (forex) supply shortfalls. The local currency, which was trading in January at GH¢11.97 to a dollar on the interbank market, and at GH¢12.33 on the retail market, is currently being bought at GH¢13.90 and sold at GH¢13.91 to the dollar at the interbank rate as of yesterday.
At some forex bureaux in Accra, the dollar is being bought at almost GH¢16.00 and sold around GH¢16.30. According to the Bank of Ghana’s (BoG's) January 2024 Summary of Economic and Financial Data, the cedi started 2024 better than the same time in 2023, when it lost 20.6 per cent to the US currency and in 2022, the cedi depreciated by 30 per cent against the dollar.
Businesses which bear the brunt of the local currency have since called on the government and the Bank of Ghana (BoG) to act urgently to save the falling Ghana cedi. Companies in manufacturing, commerce and other sectors said the persistent depreciation of the Ghana cedi against major international currencies, especially the dollar, must be checked immediately because it was slowing their business and pushing a lot of cost on the consumer who must pay higher for products whether essential or luxury.
The Ghana Union Traders Association and the Chamber of Automobile Dealership Ghana said the depreciating cedi had pushed the cost of goods and services to rise, making it difficult for businesses to stay afloat.
The disbursements from the development partners include the third tranche of $360 million support from the International Monetary Fund (IMF) after the Executive Board of the IMF approves the second review of Ghana’s programme, and another $150 million loan from the World Bank following approval from Parliament.
The government is also expected to receive $300 million under the World Bank’s Development Policy Operations, possibly in the third quarter of 2024, and other disbursements of $200 million to Ghana EXIM Bank and GCB by ECOWAS Bank for Investment and Development later in the year.
Proceeds from the 2024/25 Cocoa syndicated loan in the fourth quarter of 2024 are also expected to cushion the cedi by boosting dollar supply on the market. “We, therefore, expect total disbursements of at least $2.32 billion before the end of the year to add to the significant foreign exchange reserves already built up by the Bank of Ghana.
“We wish to assure Ghanaians that there is enough foreign exchange supply. Hence, there is no need to rush and buy foreign exchange,” Dr Amin Adam said.
The Finance Minister said the government was making remarkable progress towards restoration of macroeconomic stability and economic recovery, but added that the country was not yet out of the woods.
He said in spite of emerging fiscal pressures, including spending on security to maintain peace and order, the government was determined to hold the line to ensure that it met its fiscal targets for the year.
“We will not hesitate to adjust expenditures accordingly in the event that our revenues fall short of target. “We will use the upcoming mid-year review of fiscal policy programmed for July 2024 to make the necessary adjustment to budget to stay on course should the need arise,” he said.
Dr Amin Adam called for the support of all Ghanaians, stressing that the successful implementation of the IMF programme so far, as well as other initiatives of the government, would not have been possible without the collective effort and dedication of citizens.
“It is our conviction and belief that through our collective effort, we will deliver our common objective of restoring macroeconomic stability and debt sustainability, and promote stronger and more inclusive growth while protecting the poor and vulnerable.
“The medium term is bright, and we call on all stakeholders to continue to work with us as we strive to, among others, increase economic growth, bring inflation down and fully restore debt sustainability by 2028,” he said.
He said the public debt trajectory was already showing signs of improvement as the debt to GDP ratio reduced to 71.4 per cent of GDP at the end of 2023 from 73.5 per cent at the end of 2022.
