Cedi falls 24.3% against the dollar

After coming under pressure in May and June, the exchange rate has generally stabilised in recent times, the Bank of Ghana has said.

This was mainly driven by the still-tight monetary policy stance and improved forex liquidity support, Governor Ernest Addison told journalists on Friday, 27 September 2024 when he briefed them about the Monetary Policy Committee’s decision to cut the policy rate from 29 per cent to 27 per cent.

He said from the beginning of the year to 25th September 2024, the Ghana cedi depreciated by 24.3 per cent against the U.S dollar.

In the second half of the year, he said the cedi has witnessed a slower pace of depreciation of 7.1 per cent.

On the economic outlook, Dr Addison said the external environment has improved since the last MPC meeting as global economic activity remained resilient in the second quarter of 2024.

He said growth was supported by private and government spending, a resilient services sector and declining oil prices.

Additionally, Dr Addison mentioned that the anticipated policy easing cycle initiated by major central banks in advanced economies, in response to declining inflation rates, has also been supportive of growth.

These conditions, he noted, are favourable for the domestic economy.

He said Ghana’s domestic economy continues to recover, evidenced by the “stronger-than-expected GDP outturn for the second quarter of the year.”

Dr Addison noted that growth in the second half of the year is also expected to be firm, supported by sustained activities in the construction sector, consumption of goods and services by households and firms, exports of gold and crude oil production, as well as banks’ extension of credit to the private sector.

He mentioned that the external payment position continues to improve, characterised by higher trade surplus, and strong reserves build-up.

Notably, he said the robust growth in gold exports has helped to improve the trade surplus and international reserves, complemented by external financial inflows from the IMF and the World Bank.

“These, together, have contributed to an improved balance of payments position in the first half of 2024. Looking ahead to the end of the year, the balance of payments is projected to achieve a surplus, driven by increased exports, stronger remittance growth, and lower government external payments,” Dr Addison added.

Dr Addison said in the assessment of the MPC, preliminary data since its last meeting held in July 2024 indicates that macroeconomic conditions have generally improved.

Headline inflation, Dr Addison added, has eased, and growth has picked up, pointing out that fiscal policy implementation has been robust, providing impulse that is supportive of growth, while monetary conditions have remained tight and supportive of the disinflation process.

He pointed out that headline inflation, since the first quarter, has declined for 5 consecutive months by 5.4 percentage points.

Also, core inflation has declined sharply over the same comparative period by 6.9 percentage points.

These trends, he indicated, suggest that the disinflation process is on course.

“The latest forecasts show that inflation will continue to ease towards the range target of 13-17 per cent for the year and steadily track back towards the medium-term target of 6-10 per cent by the end of 2025, barring unanticipated shocks. At the current juncture, the committee judged the risks to the inflation outlook as fairly balanced.

He said that given these considerations, the Committee decided to lower the Monetary Policy Rate by 200 basis points to 27.0 per cent.

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