Governor of the Bank of Ghana Dr Ernest Ato Addison says Ghana needs to sustain its fiscal stability to enable the economy stand periodic shocks when foreign investors move their monies out of the country.
Speaking at the Graphic Business/Graphic Breakfast Meeting on Monday, Dr. Ernest Ato Addison said, significant pressure is brought on the local currency whenever non-resident investors take out their monies to chase after more attractive investments abroad or when importers demand a significant amount of dollars to bring in goods or services.
Dr Addison explained, despite “very significant improvement in macroeconomic indicators such as halving of the fiscal deficit, a nosediving inflation rate from 15.6% to a single digit, the currency suffered a depreciation.
This was due to a strengthening of the US dollar as a result of US monetary policy which lured investors to move their money from economies like Ghana.
“If they see the yields on other markets are more attractive they will take their investments out,” he described the attitude of non-resident investors.
Speaking further on the recent depreciation of the Cedi, he said: " on demand side we have the importers and the supply we have the exporters, to the extent that we have more importers than we are supplying broadly, you see that the currency will turn to depreciate that's the basic fundamental and I think this is the point the President was making that we need to the narrative on the currency because as long as we remain import dependent we would have that bias of the currency losing its value over time."
Dr. Addison added that the reversal of the cedi’s misfortune was down to the government’s successful issuance of a $3bn Sovereign Bond, the IMF’s pumping of the final tranche of $925million into the economy following Ghana’s completion of the Extended Credit Facility program with the IMF and the intervention of the bank in releasing foreign currency to ease the pressure.
The cedi’s improvement in recent times, he said, reflects a “successful reversal of sentiments on Ghana’s economic outlook.”