As part of measures to ensure the economy has a stable local currency for the year, and especially in the first quarter when demand for forex is high, the Bank of Ghana plans to inject a whopping US$775million through its FX forward auction programme to achieve this objective.
Out of this amount, US$50million will be pumped into the economy bi-weekly till end of the first quarter. Then from the second quarter, it will be slashed by half till end of the year. What this essentially means is that US$300million will be injected into the economy in the first quarter alone to shore-up the cedi.
Prinesha Naidoo, Bloomberg News Pedestrians use the footbridge across the Umaru Musa Yaradua Express way in Abuja, Nigeria, on Friday, Jan. 10, 2020. Revenue in Nigeria has fallen short of the government target by at least 45% every year since 2015, and shortfalls have been funded through increased borrowing. Photographer: KC Nwakalor/Bloomberg , Bloomberg
(Bloomberg) African central bankers meeting in the next two weeks amid a resurgent coronavirus may find theyâve used up most of their interest-rate ammunition to lift their economies out of recessions that still affect much of the continent.
Monetary policy committees have limited scope to provide stimulus after aggressive easing when lockdowns first shuttered output in 2020, with inflation quickening in Nigeria and Angola and restrictions that would dull the impact of rate cuts continuing in South Africa and Kenya.
African central bankers meeting in the next two weeks amid a resurgent coronavirus may find they’ve used up most of their interest-rate ammunition to lift their economies out of recessions that still affect much of the continent.
Monetary policy committees have limited scope to provide stimulus after aggressive easing when lockdowns first shuttered output in 2020, with inflation quickening in Nigeria and Angola and restrictions that would dull the impact of rate cuts continuing in South Africa and Kenya.
“I don’t think there is scope for strategic easing of monetary policy in 2021,” said Jibran Qureishi, the head of Africa research at the Standard Bank Group. “In the event that economic activity remains sluggish, a bias to cut will persist, but any cuts from these levels will be token.”
Then from the second quarter, it will be slashed by half till the end of the year. What this essentially means is that US$300million will be injected into the economy in the first quarter alone to shore-up the cedi. The data show this strategy has started bearing good fruit, as since the beginning of the year to Friday, January 15, 2021, depreciation of the cedi against the dollar has been infinitesimal – recording just 0.001 percent – using the central bank’s mid-rate as the basis for computation. Usually – with the exception of last year when the coronavirus pandemic halted international trade, which resulted in an appreciation of the currency – the cedi sees a sharp depreciation in the first quarter each year, mainly due to high demand for forex from importers to settle their bills.
As part of measures to ensure the economy has a stable local currency for the year, and especially in the first quarter when demand for forex is high, the Bank of Ghana plans to inject a whopping US$775million through its FX forward auction programme to achieve this objective.