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Ghana Cedi: GHS remains stable against the USD, but continues to recover against other currencies

The local currency remained stable against the USD in the interbank market last week due to central bank intervention to meet corporate demand, but the GHS continued to recover against other major trading currencies such as GBP and CAD as shown in the chart below. However, companies and importers are expected to start accumulating fx towards settling their end of quarter bills at the close of March, and as such the GHS could weaken against the USD this week unless there is strong central bank support in the market.

The local currency has remained relatively stable this year compared to the previous year as shown in the chart below. We remain bullish on the outlook for the local currency against the USD on the back higher gross international reserves of about US$7.55 billion (4.3 months of import cover), which should enable the central bank to intervene in the market to support the local currency when needed.

In addition, Ghana's current account deficit continues to narrow on the back of trade surplus emanating from increased export revenues and lower non-oil imports. Central bank figures indicate that the current account deficit narrowed to 4.6% of GDP in December 2017 from 6.6% of GDP in December 2016, buoyed by a trade surplus of US$1.07 billion (2.3% of GDP) in December 2017 from a trade deficit of US$1.77 billion (4.2% of GDP) in December 2016. Ghana's export revenue increased by 23.5%y/y to US$13.75 billion in 2017, driven by increased oil production and favorable commodity prices (crude oil and gold).

We expect Ghana to maintain strong level of international reserves in 2018 on the back of increased oil exports, COCOBOD syndication proceeds, proceeds from an anticipated Eurobond issuance and USD inflows from foreign investors purchasing local bonds.

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