The $750 million loan the government secured from the Africa Export Import Bank (Afrexim) has finallly hit Bank of Ghana’s (BoG) accounts.
This also comes at a time when a new policy by the bank to purchase foreign exchange (FX) from mining, oil and gas companies also took off on a positive note, after one company sold $20 million to the central bank last week.
The two developments are now expected to revive market confidence by helping to calm anxious investors and reassure the business community that the central bank is cushioned to meet its foreign exchange (FX) demands.
With these, the cedi is expected to strengthen against some of the major foreign trading currencies from this week.
BoG sources said the moves were timely and would help to bolster confidence and ultimately slow down the pace at which the cedi’s value fell against major currencies.
“We expect some cooling off of the rate of depreciation of the cedi,” one person familiar with the development told the Daily Graphic at the weekend.
“It also allows BoG to improve its FX buffers so that we are able to supply more FX to clear some of the critical outstanding demands that the banking sector has not been able to meet,” the source added.
It noted that the support from the International Monetary Fund (IMF) was also expected to rein in other imbalances in the economy such as putting the government’s debt on a more sustainable path to help sustain the gains.
The BoG source said the two developments were “very significant” and set the stage to a stabilise the FX market in the coming days.
It said the central bank now expected to build upon those successes to improve upon its reserves.
The source was optimistic that these would allow the bank to increase the size of FX auctioned to the bulk oil distribution companies (BDC) and the general public.
This, it said would ensure a broad-based FX supply to critical sectors of the economy.
“We have also intensified the domestic gold purchase programme, and included a forward purchase with one of the mines.
“These efforts would increase our gold reserves, which can be used to source for cheaper FX liquidity arrangements, such as gold swaps,” the source said.
The cedi lost about 30 per cent of its value to the US dollar between January and August 20, this year as limited FX supplies in the midst of rising demand for imports and debt servicing sparked a steep depreciation.
The depreciation deepened the woes of businesses and consumers. It added to the piercing jump in prices of goods and services, prompting calls for quick solutions.
Receipt of funds
Following the challenges, the Ministry of Finance and BoG stepped up efforts to shore up FX supplies and boost confidence to tame the pace of the depreciation and stabilise the economy in general.
Last Friday, the Ministry of Finance said in a circular that it had “received swift confirmation of the successful transfer of the funds ($750 million) into our BoG designated accounts.”
The ministry added that the proceeds would be used to finance specific priority projects in the 2022 Budget as well as provide forex to shore up BoG’s reserve position.
Within the same time, a new policy that allows BoG to buy FX from mining, oil and gas and other big exporters received a positive shot when the extractive exporters agreed to sell their forex to the central bank.
The Chief Executive Officer of the Ghana Chamber of Mines, Sulemanu Koney, said in a separate interview that his outfit was willing to help make the policy a success.
Mr Koney said the chamber saw the policy to be a call to national duty and had encouraged its members to see how they could support without jeopardising their operations.
Consequently, he said one member sold $20 million to the central bank last week, with more firms also lining up to close similar deals.