Assessing Ghana’s forex market amidst trade surplus contraction
The latest report from the Bank of Ghana reveals a significant 54% shrinkage in Ghana’s trade surplus balance for Jan-Feb 2024.
This reduction signals a concerning downturn in foreign exchange earnings from our exports, notably impacted by decreased cocoa production among other factors, ultimately leading to a depreciation of the Cedi.
Currently, the Cedi stands at Ghc 13.75 to a dollar, and the outlook suggests further depreciation given the substantial decline in foreign exchange reserves, limiting the Central Bank’s ability to intervene effectively in the forex market.
The sustained depreciation of the Cedi could potentially ignite inflationary pressures within the economy, prompting a response from monetary authorities in the form of policy rate hikes, which would consequently elevate overall interest rates in the country.
To mitigate these challenges, the government must swiftly implement prudent fiscal measures aimed at bolstering domestic production, fostering export promotion, reducing imports, and offering concessionary facilities.
Such actions are essential to stabilize the Cedi and alleviate inflationary pressures in the short term.
In conclusion, proactive steps need to be taken to address the current vulnerabilities in Ghana’s forex market, ensuring sustainable economic stability and growth.
The author is; Martin Ohene Anim- Ph.D. candidate, MBA, MSc, CA, CFA (Level 1), Ch.Fe, CEPA, MIIA, BSc
