The Central Bank has attributed some of Ghana’s current economic crisis to external factors that arose as a result of the United States of America’s (U.S.A.) efforts to stabilise their economy.This was stated in a report issued by the Bank of Ghana (BoG) following its 109th Monetary Policy Committee meeting on November 28.

0

The BoG, in its report, made sure to emphasise the US’s role in escalating economic conditions for several countries around the world, including Ghana, while citing a number of factors that have contributed to Ghana’s current economic situation.

1

According to the Central Bank, when the US Federal Reserve revised some of its policies, it resulted in “tight global financing conditions and a stronger US dollar against major international currencies.”In September 2022, the Federal Reserve raised its benchmark interest rate by 0.75 percentage points, the third increase in a row, bringing the Fed rate to 3%-3.

2

25% By doing so, the US central bank, as part of efforts to check its inflation (8.2% as of September), increased demand for the dollar from foreign investors attracted by the higher returns available in the country.Since the US dollar is the existing currency for global trade, emerging markets faced a rise in the cost of imports.

3

According to the Bank of Ghana, these external shocks have had severe consequences on the Ghanaian economy, reflected in high and rising inflation and depreciation of the local currency.“These developments have spilled over into currency pressures and imported inflation, complicated access to external capital markets, and resulted in acute capital outflows, especially in emerging markets and frontier economies,” the Central Bank added.

4

Per the Bank’s report, the foreign exchange market witnessed increased volatility, with intense pressure on the local currency, especially in September and October 2022.Other external factors that led to the significant drop in the value of the cedi include; the sovereign downgrades, the de facto closure of the international capital market, portfolio reversals, and increased demand for foreign exchange amid supply constraints.

5

As of November 24, 2022, the Ghana Cedi cumulatively depreciated by 54.2 percent against the US dollar.The local currency lost 48.9 percent and 49.9 percent of its value to the Pound and Euro, respectively.In comparison with the same period of last year, the Ghana Cedi was much stronger.It depreciated by 2.6 percent and 0.2 percent against the US dollar and the Pound, respectively, and appreciated by 6.6 percent against Euro.

6

Since revising the interest rate, the US has seen its inflation rate drop to 7.7% as of October 2022.

7