BoG to increase international reserves to 3 months of import cover
The Bank of Ghana (BoG) hopes to increase international reserves of the country to about three months of import cover by the end of the year, mainly due to inflows from the Eurobond and the cocoa syndicated loan, the Governor of the BoG, Dr Henry Kofi Wampah, has announced.
Briefing journalists at the 61st regular meeting of the Monetary Policy Committee (MPC), he said gross international reserves, as of the end of August 2014, stood at US$4.2 billion, equivalent to 2.4 months of import cover, as against US$5.6 billion, representing 3.1 months of import cover, at the end of 2013, he said.
The expected inflows from the Eurobond and the cocoa syndicated loan would also provide liquidity on the foreign exchange market, Dr Wampah said, adding that the government’s fiscal consolidation efforts were expected to be strengthened under the International Monetary Fund (IMF), which will also provide additional balance of payment (BoP) support.
During the first eight months of the year, he said, the local currency depreciated by 29.8 per cent against the US dollar on the interbank market, compared to 3.9 per cent in the same period last year.
Dr Wampah said the MPC rate remained unchanged at 19 per cent, adding that the committee would continue to monitor developments and take appropriate action when necessary.
External developments
The BoP for the first half of the year recorded a deficit of US$1.5 billion, compared to a deficit of US$677 million in the same period last year, while the current account deficit narrowed to US$2 billion, from US$2.3 billion in the same period last year.
That was as a result of improvement in the trade deficit and net private transfers, Dr Wampah explained.
He said the export of cocoa beans increased to US$1.4 billion from US$1.2 billion due to higher volumes, with oil exports remaining virtually unchanged at US$2.6 billion, while earnings from non-traditional exports, including cocoa products, declined marginally by US$44.9 million to US$2.1 billion.
During the review period, the BoG Governor said, total imports fell significantly to US$9.5 billion from US$11.7 billion in 2013, while oil imports fell by 10 per cent to US$2.3 billion and non-oil imports declined by 22 per cent to US$7.2 billion.
In spite of the ongoing economic challenges, Dr Wampah said, indications were that the pace of domestic economic activity continued to firm during the second quarter, adding that the BoG’s Composite Index of Economic Activity (CIEA) for the second quarter of 2014 suggested improved activity, relative to the same period in 2013.
Meanwhile, he said, the index registered a year-on-year real growth of 10.8 per cent at the end of June 2014, compared with a growth of 3.3 per cent for the corresponding period in 2013, while the main drivers of the improved economic activity for the period under consideration were domestic Value Added Tax (VAT) and Deposit Money Banks (DMBs) credit to the private sector.