On August 3rd Ghana approached the International Monetary Fund in order to restore the cedi market value which has fallen 40% against the US dollar during the first half of 2014.
September 08, 2014 | Farrah BrakeOnce cited as an example of Africa’s rising stars, Ghana’s plummeting currency and poor economic policies have now pushed president John Mahama to seek international assistance. The cedi has been dropping steadily since the beginning of 2014 with new record slumps recorded every few months. These dramatic decreases in May caused the cancelation of a planned auction of 100 million cedis of seven year bonds then valued at $33 million dollars, now worth $26 million. This one of the latest cancelations after a 300 million cedi five year bond sale was cancelled in March.
Bank of Ghana has already limited foreign exchange withdrawals as far back as February 2014 with foreign currency account holders having to prove evidence of overseas travel in order to trade. Local companies are in need of dollars to pay for imports as Ghana’s economy has become largely import-dependent with a fiscal gap in GDP reaching 10.8% in 2013. Ghana’s largest exports include coca, gold and crude oil although the import on refined oil largely outweighs export, attributing to the deficit. The IMF stated in May that if Ghana continues with its current economic policy the fiscal deficit would be at 10.2% for 2014 and 9.3% in 2015, which is much higher than government’s official forecast.
President Mahama who has opposed international involvement in internal affairs of the country has now approached the IMF in an attempt to gain confidence from international financial institutions and investors. Although seeking assistance from the body he has stated that domestic policy will not be significantly impacted and the government will be “removing fuel and utility subsidies, streamlining public sector wages, and reforming the public financial management system”. The government has been slow to cut public spending and manage the cost increase in wages which have risen 75% in the last two years. It has also been slow to combat the double...
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Government Finance, Risk and Regulation, Trade Finance, Transaction Banking, Aid Disbursement , Performance MeasurementKeywords:Ghana, Cedi, Bank Of Ghana, Trade Deficit, Market Valuation, IMF, Market Risk
