The country’s Balance of Payment (BOP) has strengthened consistently over the last eight months aided by oil exports, strong forex reserves and the issuance of Eurobonds by the government.

The BOP statistics, which is the record of all economic transactions between the country and the rest of world over the last eight months, was contained in the August edition of the African Local Markets Monthly (ALMM) report issued by the Standard Bank on September 17.

“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 $1.5 billion, giving rise to a trade surplus of $261.1 million,” the report said.

Slow cedi depreciation

However, the ALMM also indicated that the cedi was expected to depreciate at a much slower pace against the US Dollar this year than it experienced in the last couple of years. 

“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 of the cedis will be considerably lower than the average 13.0 per cent annualised pace of depreciation over the last 10 years,” the report indicated.

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

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

The FX sales are not intended to prevent the Ghana cedis from depreciating per se, but it is notable that the BoG’s FX sales are at rates considerably below prevailing interbank rates,” the report said.

However, this is not something new as the BoG typically sells US dollars at rates lower than the prevailing market rates.

Robust forex reserves

The Head of Africa Research at Standard Bank, Mr Phumelele Mbiyo, reacting to the report findings, said; “Forex reserves remain relatively robust, something we expect to persist over the remainder of this year and for much of next year.”

The country’s gross forex reserves amounted to $5.9 billion in May, up from $5.0 billion in April. 
This was as a result of the government’s issuance of Eurobonds which moved the country’s forex reserves to $7.3 billion at the end of June.

The report also noted that anecdotal evidence suggested that there had been a fair amount of outflows from the market in the last three months.

“While the magnitude is uncertain, the outflows have prompted the BoG to sell some forex. As of the end of May, foreigners held GH¢28.16 billion of local debt out of a total of GH¢72.4 billion,” it said.

ALMM focus

The ALMM is a monthly report issued by the Standard Bank Group, the parent company of the 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.