Bank of Ghana warns reserves could come under pressure as gold exports pause
The central bank says Ghana has reserves covering 4.2 months of imports, but a projected current account deficit and a pause in GoldBod exports could weaken its external position. Policymakers must also decide whether to hold the 14% policy rate as inflation rises.
Ghana’s foreign reserves could come under pressure in the third quarter, the Bank of Ghana governor has warned, citing a projected current account deficit and a pause in gold exports by the Ghana Gold Board since mid-August.
Dr Johnson Asiama said the risks required close monitoring before the usual rise in demand for foreign currency in the fourth quarter. Ghana’s gross international reserves currently cover 4.2 months of imports, according to the Bank.
“Rebuilding reserves will be a key priority for the Bank in the coming months,” he said at the opening of the Monetary Policy Committee’s 132nd meeting.
The warning comes as the committee considers whether to keep the policy rate at 14%. Alongside the reserve outlook, it must assess a recent rise in inflation and the possible effects of higher global energy prices on costs in Ghana.
Headline inflation increased from 3.2% in March to 5.0% in August. Dr Asiama said it remained below the lower bound of the Bank’s medium-term target band, but its upward movement raised a question for policymakers: whether higher energy prices and administered tariffs would cause a temporary increase or more lasting inflation.
The governor also described the escalating Middle East crisis as a source of both potential gains and risks for Ghana. Higher gold prices could boost export earnings and help build reserves, he said, while higher energy and fertiliser costs could feed through to transport, production and food prices.
According to figures cited by the Bank, Brent crude rose from above $85 a barrel when the committee last met to about $107 last week. The governor said uncertainty over the conflict had worsened the outlook for global growth and inflation.
A stronger US dollar and tighter global financial conditions could add pressure on currencies in emerging markets, including the cedi, the Bank said.
The committee’s decision will show how it judges those competing risks. “The Committee’s task during this meeting is to judge whether the balance of risks has shifted enough to warrant a different policy response, or whether there remains a case for still maintaining the policy rate at its current level,” Dr Asiama said.