International reserves outlook very bright – Governor

The international reserves outlook of the country looks bright and stable, Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said.

He said the recent $750 million loan approved by Parliament and the Cocoa Syndicated loan of about $ 5 billion being expected by the end of the last quarter of this year would help bolster the reserve position of the country.

Responding to a question on whether the withdrawal of portfolio investors would not affect the Gross International Reserve (GIR) position of the country after the 107th regular meeting of the Monetary Policy Committee of the BoG, Dr Addison responded in the negative.

He said the country did not face any threat to its external reserves if foreign portfolio investors decided to pull out of the country.

Dr Addison said the country Gross International Reserves (GIR) at the end of June this year stood at $7.7 billion, equivalent to three months of import cover, contrary to what the Finance Committee put out last week.

The Finance Committee last week reported that the country’s GIR had dwindled from $9 billion to $3 billion.

However, he said the June GIR was lower than the reserve position of the country in December 2021, which stood at S$9.7 billion, covering 4.3 months of import cover.

“The decline in the reserve buffer, alongside unfavourable global financing conditions, exerted significant pressures on the foreign exchange market. On the interbank forex market, the Ghana Cedi cumulatively depreciated against all the three major currencies; 19.2 percent against the US dollar, 8.8 percent against the Pound Sterling, and 10.0 percent against the Euro as at July 20, 2022,” he said.

The Minister said “In the corresponding period of 2021, the Ghana cedi depreciated by 0.6 and 0.7 percent against the US dollar and the Pound Sterling, and appreciated by 3.3 percent against the Euro.”

Touching on the move by the government to pursue an International Monetary Fund (IMF) programme, Dr Addison said the programme help re-anchor expectations through implementation of reforms to restore creditworthiness, and eventually lead to a regain of access to the international capital markets.

On July 1, 2022, the government announced its intention to seek support from the IMF to support its Enhanced Domestic Programme and for Balance of Payment support.

The Governor said the markets had already started internalising the positive effects of the engagement with the IMF.

“The Committee expects that the macroeconomic framework that will underpin an agreed IMF supported programme will present a stronger coordinated monetary and fiscal policy framework that will anchor stability and prevent a wage-price spiral, which will lead to inflation becoming more entrenched,” Dr Addison stated.


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