Expected HIPC gains, donor inflows leading to Cedi stability – Databank

Attractive yields on money market instruments, expectations of HIPC benefits and strong donor inflows over the last 10 months have contributed to relative stability of the Cedi.

Databank Equity Research statistics made available to the Ghana News Agency said there have been attractive yields on money market instruments, leading to a shift from investments in foreign currencies as a store of value, to money market instruments.

"This eased pressure on foreign currencies and contributed to the stability in the local currency", the research said adding, "strong donor inflows this year has also contributed to the good supply of foreign exchange in the economy." The research covered the third quarter of 2001.

It said expectations of Ghana reaching a decision point under the Highly Indebted Poor Countries Initiative by the end of the year and the promised debt relief of 170 million dollars annually, is also a factor in the stability of the currency.

"Government's commitment to put a tight lid on expenditure by not spending more than it earns has also helped to anchor the cedi." The research commended government for keeping a hold on the cedi's stability even through the pre-Christmas era when it is tested most by high demand for foreign currencies.

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External debt drops by 90 million dollars

Ghana's external debts including obligations to the International Monetary Fund (IMF) dropped by 90 million dollars to 5,885 million dollars at the end of the second quarter, figures from Databank Equity Research made available to the GNA have indicated.

This was due to sharp decreases in short and medium term expenditure pattern of the country, which put current debt stock for the period at 5,945 million dollars.

Long-term debt rose by 30 million dollars to 5,417 million dollars in the second quarter of this year. "The increase in long terms debt was due to an increase in bilateral and multilateral debts accrued in the second quarter."

Bilateral debt went up from 1,574 million dollars to 1,591 million dollars while multilateral debt increased from 3,812 million dollars to 3,826 million dollars. The proportion of short and medium term loans in the country's total loan portfolio declined from five per cent and six per cent respectively in the fourth quarter of year 2000 to three per cent and five per cent in the second quarter of 2001.

Long-term debt soared from 89 per cent in the fourth quarter of last year to 93 per cent in the second quarter of 2001. The study noted "the changing portfolio of external debt is an indication of a shift in government's external borrowing style from short and medium term to long term financing."