Ghana’s Balance of Payment (BOP) has strengthened consistently – aided by oil exports, strong forex reserves and issuance of Eurobonds. This was contained in the August edition of the African Local Markets Monthly (ALMM) report issued by the Standard Bank.

  • “Our relatively constructive view is founded on an assessment that the country’s BOP has strengthened on a durable basis. Oil exports have helped to turn the trade balance to surplus, something that is likely to last. In the first five months of the year, total exports amounted to roughly US$1.5billion, giving rise to a trade surplus of US$261.1million,” the report said.

The ALMM also reports that the Ghana cedi is expected to depreciate at a much slower pace against the US dollar this year than has been experienced in recent times.  The report indicated that: “On a multi-month basis, it still looks likely that the pair will head higher.

But it is likely to be at a far slower pace than we have seen in recent years. We still believe that the pace of depreciation for the GH¢ will be considerably lower than the average 13.0% annualised pace of depreciation over the last 10 years”.

The report attributes this to the Bank of Ghana’s (BoG) willingness to supply the currency market with forex rates much lower than prevailing rates, a strengthened balance of payment (BOP) on a durable basis largely supported by oil exports, and government’s issuance of Eurobonds.

According to the report: “The BoG has shown itself willing to supply FX to the market whenever there are indications of large outflows.

The FX sales are not intended to prevent the GH¢ from depreciating per se. But it is notable that the BoG’s FX sales are at rates considerably below prevailing interbank rates. Of course, this is not something new. The BoG typically sells US¢ at rates lower than the prevailing market rates”.

Commenting, Phumelele Mbiyo-Head of Africa Research at Standard Bank said: “Forex reserves remain relatively robust, something we expect to persist over the remainder of this year and for much of next year. Gross forex reserves amounted to US$5.9billion in May, up from US$5.0billion in April.

Also, thanks to the government’s issuance of Eurobonds, forex reserves rose to US$7.3billion at the end of June, covering 3.9 months of imports according to the BoG’s calculations”.

The report also noted that anecdotal evidence suggests there has been a fair amount of outflow from the market in the last three months or so. “While the magnitude is uncertain, the outflows have prompted the BoG to sell some forex. As of the end of May, foreigners held GH¢28.16billion local debt out of a total GH¢72.4billion.”

The African Local Markets Monthly is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana, and focuses on the economic and financial outlook of African countries. The report also reviews current economic situations and makes short- to medium-term predictions about the economies of African countries.