The Central Bank has stated that although the country’s Gross International Reserves (GIR) position at the end of March, this year was a drawdown of $513.9 million in line with the projected cashflow for the period, the recent Eurobond raised the level of international reserves to US$8.1 billion (4.4 months of import cover) as at 17th May, 2018.
It said this provides enough cushion against any potential external vulnerabilities.
Currency situation
In line with the strong external payments position, sustained improvement in the macro fundamentals and improved liquidity, the foreign exchange market has remained calm.
The cedi appreciated by 0.02 percent against the US dollar in the year to 18th May, 2018 compared to a depreciation of 0.97 percent in the same period of last year.
Despite the marginal nominal appreciation of the cedi against the US dollar, the real effective exchange rate (in trade-weighted terms) depreciated by 0.9 percent over the first four months of the year, showing that the cedi remains competitive and broadly aligned with the underlying fundamentals.
“There is evidence to show that some stabilization and consolidation, especially with respect to inflation and exchange rate expectations, are taking hold. The fiscal and monetary policy mix and the corrective measures implemented to put the economy back on track are beginning to yield positive results.”
Inflation
Headline inflation has declined steadily from 11.8 percent in December 2017 to 9.6 percent in April 2018, the lowest since 2013 and within the medium-term target band of 8±2 percent.
Underlying inflation pressures have also been contained as reflected in the bank’s core measures of inflation and inflation expectations.
The main core inflation measure, which excludes energy and utility, declined from 12.6 percent in December 2017 to 10.4 percent in April 2018, converging toward the headline inflation.
Evidence from the weighted inflation expectations by businesses, consumers and the financial sector also support the above.
In April 2018, rates on the 91-day Treasury bill instrument declined to 13.3 percent from 16.5 percent a year ago.
Similarly, the 182-day instrument declined to 13.9 percent from 16.8 percent, while the 1-year note also dropped to 15.0 percent from 18.3 percent over the same comparative periods.
Also, the weighted average interbank rate, the rate at which commercial banks lend to each other, declined further to 17.5 percent in April 2018 from 23.3 percent a year ago.
The Monetary Policy Committee (MPC) decided to reduce the monetary policy rate by 100 basis points to 17 percent.
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