Foreign Exchange Market: Dollar demand stays strong despite Bank of Ghana market support

Added: 2026-05-12

[00:00:00]All right, good afternoon. Welcome to the marketplace. Coming up, dollar demand from businesses remains high despite [music] improved market support from the Bank of Ghana. Why is the demand elevated? We will discuss.

[00:00:13]Also coming up, Ghana set to pass final IMF program review on back of strong progress on key targets.

[00:00:21]And Fitch Ratings [music] projects government could extend temporary measures introduced to cushion consumers against rising petroleum prices.

[00:00:32]My name is Daryl Cowell. Thanks for being with us. Details coming up.

[00:01:32]And also look at the currency market.

[00:01:34]We'll begin with the foreign exchange market. A new development is dollar demand from businesses remains high despite improved market support from the Bank of Ghana. Here's more in the following report.

[00:01:47]In the first week of this month, the Bank of Ghana stepped up market support under its dollar intermediation program.

[00:01:54]This saw the Central Bank increase its weekly support through its auction program by more than three times. It was the expectation that the auction will help in dealing with demand pressures at the time. However, our checks last week showed serious pressure still persist.

[00:02:11]Market data even shows that the Bank of Ghana has again slowed down supply. Last week, commercial banks were looking for more than $420 million.

[00:02:20]However, the Bank of Ghana just sold $124 million. Some of these demands are coming from the mining and energy sectors of the economy. New data from the commercial banks shows from January till now, the cedi has depreciated by almost 7% against the US dollar. Our checks with the commercial banks also showed that the situation might not be normalizing anytime soon. But for some market analysts, the situation can be described as interesting. First, it's because demand normally picks up in the first quarter of each year and normalizes from the second quarter.

[00:02:53]Again, the Bank of Ghana has adequate reserves, so why are they not intervening?

[00:03:00]All right, let's make sense of this.

[00:03:01]Joining me on Zoom Nelson Kojo Kuagbenu, who's a financial analyst. Good afternoon to you. So, the Bank of Ghana has been supporting the market, but dollar demand still elevated. How do you explain this?

[00:03:16]All right, thank you very much Daryl and good afternoon to you. Well, I think that it is simply as a result of high import demand and of course the cautious supply of forex by the Bank of Ghana.

[00:03:29]And Daryl, don't be surprised. This is an annual cyclical event that happens most especially when companies in the commerce sector wants to restock and so there is always pressure on the dollar for the first five months of the new year and so this is naturally a normal phenomenon. And also, I mean, companies have are done with their financial statements. Most of them will be compelled to repatriate their, you know, profit back to their home country. And so, that also puts some level of pressure on the the the the the forex. And also, the cautious approach that the Central Bank itself is also adopting because I think people are criticizing the footprint of the Bank of Ghana within the FX market. And so, the Bank of Ghana is also kind of cautious and prudent as far as their intervention mechanism is concerned. And so, all these factors are actually contributing to uh the depreciation of the Ghana cedi.

[00:04:25]Yeah, you talk about the footprint of the Central Bank on the foreign exchange market, which sometimes raises eyebrows.

[00:04:32]Let's let's talk about what they're doing right now, the kind level of intervention. Is it enough? Should they be doing it? Or there are structural pressures that are still driving this demand?

[00:04:44]Well, I think this is not the first time this issue has come up. I mean, somewhere latter part of last year, I think the IMF also raised that issue regarding the intervention or the financial intermediation of Bank of Ghana within the FX market. And some of us actually came out to actually defend the Central Bank in the sense that if the intervention is yielding the needed result for us, I don't think there is any problem with that because the Ghana is not the only country where the Central Bank do intervene within the FX market. As to whether the intervention is sufficient enough, we are well aware that Bank of Ghana has the sufficient buffers in terms of dollars to support, I mean, the market intervention program.

[00:05:25]And so, if the demand continues to increase, I think they have to readjust their intervention strategy to actually give out more in order to meet the demand of those who actually want the dollars. But what does this persistent dollar demand signal about business confidence and import activity in the Ghanaian economy right now?

[00:05:48]Well, it simply means that our economy is still import driven.

[00:05:53]I mean, despite the intervention that government over the years have made to actually make Ghanaian to consume our local product. I mean, our economy is still heavily dependent on on on importation, which means that if we don't import certain things into this country, we may not be able to meet the the demand. So, the the continuous pressure on the Ghana city simply means that I mean, our economy is still import driven.

[00:06:21]Well, let's let's switch topics. Let's talk about the IMF.

[00:06:25]A team has been in town reviewing our program so far.

[00:06:30]Based on the significant progress made on critical targets, we are expecting them to pass us. What what key benchmarks is Ghana expected to meet to secure approval under the IMF program review?

[00:06:45]Well, I think fiscal consolidation is key because it is as a result of fiscal mismanagement that actually took us to the IMF. And so, I mean, there was the primary surplus target of 1.5% of GDP, which the finance minister also indicated in the 2026 budget. So, I think it's one of the key benchmark target that the IMF will be looking at.

[00:07:10]Then of course, I mean, you can't take inflation out of the the the discussion.

[00:07:15]I mean, in terms of inflation, I think the finance ministry and the Bank of Ghana has done very well to actually sustain the single digit even below the lower arm of the Bank of Ghana's, you know, medium-term target of 8% plus or minus two. And so, we can confidently say that the inflation has been contained and it's one of the areas that they will be looking at. Then of course, our debt management strategy. You'll recall that as at the end of last year our debt actually reduced from 61.8% to about 45.3%. That is a significant improvement and apart from the 2.7 billion Ghana cedis you know bond that the government you know issued recently, they haven't you know gone for any loan outside the country even though they have they've been very very active within the treasury bill market and so that is also another area that they'll be looking at in terms of debt management strategy and our projection in terms of debt to GDP ratio. And of course, they'll also be looking at certain structural reforms >> Mhm. that the government has implemented since the the program started. And and how important will the expected IMF board approval in August before investor confidence in Ghana's access to external financing?

[00:08:33]Well, investor confidence has already heightened. I mean just last week the Ghana's economy was upgraded in terms of rating and so investor confidence has increased since but then don't forget that once the IMF pass the the last you know review they'll be giving us about 385 million dollars and that is a lot of money to come up and sure you know the reserve position of the country and so with all these two factors we expect investor confidence to heighten and also in terms of government strategy to borrow the the last rating that was not upgraded and the IMF review you know a review will go a long way to actually enhance our chances of borrowing from the international capital market and of course the I mean the interest rate that will be paying if government intends to go and borrow from the international capital market. All right, thank you so much. Nelson Kojo Kuawuge is a financial analyst and joins us with his views on Uh, two separate issues we've been talking about today, and that's uh, the IMF uh, program review as well as uh, issues to do with the high demand for uh, dollar. Now, we are taking a short break. When we come back, we'll be tackling another one of our top stories today. Rating agency Fitch uh, ratings projecting that government will uh, take some more measures to uh, cushion uh, consumers of fuel uh, petroleum products in the wake of rising fuel prices. We've got that as a fashion coming up right after this break.

[00:10:07]>> [music] >> And welcome back to the marketplace.

[00:10:11]Rating agency Fitch rating ratings is projecting that the government could extend temporary measures introduced to cushion consumers against rising petroleum prices. According to Fitch, the extension is likely if the fiscal cost remains below 0.1% of GDP per month and can be offset by savings elsewhere.

[00:10:30]The projection was contained in Fitch's latest country assessment report on Ghana. It said the government may be compelled to maintain the intervention because of the potential impact of rising fuel prices on inflation. Joining me on Zoom, chartered energy economist Effah-Nhyo Osae Gyimah to discuss this.

[00:10:48]Good afternoon to you. How significant is the fiscal impact of government's fuel price cushioning measures, and can Ghana realistically keep them going beyond the current deadline?

[00:11:00]Good afternoon, Daryl, and thank you for this opportunity.

[00:11:04]With regards to Ghana's fuel cushioning, it's understandable for government to do that, especially in the short term.

[00:11:12]However, this is physically not sustainable.

[00:11:15]And we understand the pressures that is coming around fuel prices, inflation, and the possible um, impact that is going to have on CD depreciation and the fact that government will also have to maintain fiscal discipline in terms of its expenditure and spending within government budget. Um however, when you assess the impact that comes with government cushioning fuel prices, um on the larger scale, it's very huge.

[00:11:45]You can see that uh it may appear very small at the pump because if you look at the price government is using to cushion these fuel prices, it's just two cedis on diesel and 0.36 Ghana cedis on petrol. It looks very small, but on the larger scale, it is very huge. And this might directly or indirectly um extend into government cost and the budget that government is has already prepared. And so, beyond the fact that government is a very good thing for government to do that in a short period, I think in the longer term, government should try as much as possible to make various analyses considering the various indicators in the economy before they make any decision on whether to go ahead with the cushioning of fuel prices.

[00:12:36]Again, it is very good that the Fitch has given us a new rating and showing that Ghana's fiscal outlook it is good and it is looking great. Um and this is really because of the fact that government has been able to build a stronger reserve and the fact that the debt in the country has also um gone down. But then, government should look at various indicators in the country before they make any decision to continue cushioning the fuel prices.

[00:13:05]Other than that, government is going to risk um depleting or is going to risk um coming down when it comes to the our credit outlook and our fiscal outlook on the market and the achievement we've achieved currently with Fitch increasing our ratings might come down in the future.

[00:13:24]If oil with Brent crude rise into um around $105 a barrel. What immediate pressure does this place on domestic fuel pricing and inflation?

[00:13:36]Um well, obviously, this feeds directly into our inflation rates when it comes to whenever prices of fuel increases on the global market. This is due to the fact that Ghana heavily depends on imports of fuel prices in the country. And looking at the government or the country as a whole, everything depends largely on fuel. And so, it is directly going to feed into transport first, which is going to increase production cost. It's also going to increase the transportation of even food items and product. And so, the immediate impact is the fact that inflation is always going to increase due to the fact that we import a lot of fuel. And so, the immediate impact is that inflation is going to increase. But then, if government is going to put in strategic um policies to ensure that we reduce the the amount of fuel that is being imported into the country, then we are also going to reduce importing inflation into the country.

[00:14:39]>> [clears throat] >> Yeah, and and Fitch suggests same that inflation could rise again due to oil prices despite earlier gains. So, how should policy makers address this? Find the balance between inflation control while protecting consumers.

[00:14:54]Um well, as I've already discussed um and I've already said in my earlier statement, government shouldn't just go ahead to bring out cushioning um the people in in or generally everybody in the country, but it should be targeted. And for instance, certain sectors of the economy can be looked at especially with regards to the production sector who heavily depends on diesel in terms when to do their production. Government can look at some of these sector and give them the cushioning rather than having a cushioning on the blanket size in the economy. And so, our government, Bank of Ghana, as it's currently doing, can also increase its vigilance on the monetary market to ensure that inflation rate does not increases. Um this amongst other various policies and amongst various targets that the government is going to put in place is going to help control inflation in the future.

[00:15:52]Yeah, let's talk about the short-term risks and benefits for instance of government absorbing part of the fuel cost, maybe two cities per liter on diesel, uh 36 pesos on petrol. In the short-term, what are the risks and benefits?

[00:16:07]Well, in the short-term, the benefits are very good. Um you're going to see that households are going to have some kind of relief. Um you're going to see a slow increase in fuel the increase in the prices of transport first. Um businesses are going to have a very good feel of it because at the end of the day, the cost that they would have used to, you know, transport some of their goods or bring out certain services onto the market is going to be reduced due to the fact that government is cushioning them. But the risk is the fact that government is going to have a revenue fall um and also going to have an increase in expenditure, which is going to lead or affect our fiscal discipline that the government has, you know, been able to maintain over the time. And so, the risk mainly is the fact that government will be risking its fiscal um its fiscal impact or its fiscal achievement that has warranted Fitch in giving us a good rating. And that is going to be the risk. But the benefit is going to be enormous. Consumers are going to feel some kind of relief at the pump. Everybody in the country is going to not going to feel the impact that comes with that in the in the short term.

[00:17:26]And and given Ghana's improving debt outlook and a stronger city performance, how sustainable is the current approach to managing external shocks like the global oil price volatility?

[00:17:40]With regards to that, this even with regards to Fitch upgrade it reflects fiscal consolidation, stronger reserves, debt reduction and a better macro management. But that progress can actually be reversed if Ghana is going to continue to respond to external shock with a broad fiscal absorption. And so with regards to the current approach, it is only going to be sustainable if it's going to be temporary and it's going to be rule be let's say rule based and linked to global oil prices as or maybe linked to exchange rate movement. If government is going to do that in times of its sustainability, then of your city, government would be able to make a very good policy when it comes to its sustainability. Again, if the price of force is going to stay around 105, I think 104 dollars, then government cannot continue to absorb these four costs indefinitely without affecting its revenue and the various energy sector obligations that government or even the debt target that government has set for itself. And so in terms of sustainability, government should ensure that this approach is temporary and it should link it to various global oil price that is going to come and also just opposes with exchange rate movement in the country before it makes and permanent decision to say this is what we are going to do to ensure that that's outlook of the country still can be reduced in the long term.

[00:19:19]If I know thank you so much If I know who Sajiman is a chartered energy economist great to speak with you. We have some time for some more stories.

[00:19:27]Academic City University says it is positioning Ghana to compete in future industries through the introduction of specialized engineering and technology programs focused on electric vehicles, nuclear energy and artificial intelligence. Speaking at the launch of the university's new programs, president of the Academic City University Fred Mac Mac Baglory says the institution is focused on developing local talent to solve Ghana's energy, transportation and industrial challenges whilst preparing students for emerging global job opportunities.

[00:20:01]The launch of the university's new academic programs, president of Academic City University College says the institution is pursuing advanced engineering programs that align with the future of global industry. He explains that although the university is still engaging regulators over accreditation concerns surrounding its electric vehicle engineering program, Academic City remains committed to training students in emerging technologies rather than traditional systems dependent on fossil fuels. We are not going back to gas and diesel. We want something a little smarter, right? Something that is more forward-looking and forward-thinking. And I mean, look at what is happening in China with all these EV vehicles, right? They're going to be here soon and who is going to maintain them? And who says we cannot build our own EV systems? But anyway, from our vision, we are we know exactly where we are headed.

[00:20:50]We are educating for three reasons.

[00:20:54]One, to solve our problems.

[00:20:58]Whether it's in energy, whether it's in health care, whether it's in transportation. So, that's the first pivot.

[00:21:04]The second pivot is to educate to enhance our strengths.

[00:21:09]Right? So, if it's in agriculture, what are the systems that we need to develop so that we can become self-sufficient?

[00:21:15]And then, of course, in the process of executing these two, we also want to make sure that we are producing industry leaders. We're producing leaders in business, we're producing leaders in technology, we're producing leaders in entrepreneurship.

[00:21:28]>> Meanwhile, board chairman of the Engineering Council, engineer Dr. Kwame Boakye, says Ghana needs stronger engineering leadership and problem-solving systems to address national development challenges sustainably. So, first is the engineering training. Okay.

[00:21:45]Engineering is about first learning to define the problem well.

[00:21:55]You know, trivial as it may sound, one of the hardest things is to define the problem well.

[00:22:02]Cuz if you define the problem well, you're half on the way to solving it.

[00:22:07]The university says the newly introduced programs forms part of efforts to build industry-ready graduates capable of supporting Ghana's long-term economic transformation through innovation, technology, and sustainable development.

[00:22:22]And that's the marketplace this afternoon. Thanks for watching, everyone. There is more news on our website, myjoyonline.com/business.

[00:22:29]Let's give you an idea of what is making news over there. Government likely to extend fuel relief amid crude oil prices. That's according to Fitch Solutions. We discuss that. Also, Chinese company Huawei agrees to fund Oyarima development amid Atlantic Lithium takeover talks. More on that, myjoyonline.com/business.

[00:22:50]My name is Daryl Qua. Thanks for watching. We will be back same time tomorrow.

[00:22:56]>> [music]