The currency of the world’s second-biggest cocoa producer weakened 2.3 percent to 3.025 per dollar by 3:46 p.m. in Accra, the capital. That’s the biggest drop in the world today after Somali shilling among more than 150 currencies tracked by Bloomberg. Its year-to-date loss of 21 percent is the worst in Africa.
Ghana’s fiscal gap reached 10.8 percent of gross domestic product in 2013, wider than a budget forecast of 9 percent, the central bank said in April. A rising civil-servant wage bill, tax collection that missed targets and slumping export earnings weighed on revenue. Reserves dropped 9.8 percent to $4.7 billion in March, according to Bloomberg calculations made using central bank data.
“Offshore players are still concerned over the outlook for the fiscal deficit and falling levels of foreign reserves,” Elvis Darku, head of fixed-income trading at the Ghanaian unit of Access Bank Plc, said by phone today. “This has resulted in the high pricing of the dollar by the few people including banks that have some for sale.”
The gap will probably exceed 10 percent of GDP for a third consecutive year in 2014, Moody’s Investors Service said in February. The median of four analysts in a Bloomberg survey conducted from May 16 to May 21 projects an average 2014 deficit of 9.1 percent.
“The situation is exacerbated by the absence of fresh portfolio flows into Ghana’s fixed income market,” Samir Gadio, London-based emerging-markets strategist at Standard Bank Plc, said by e-mail today. “The marginal pace of fiscal consolidation is not helping in terms of confidence in the foreign-exchange regime.”
The West African nation canceled a planned auction of 100 million cedis ($33 million) of seven-year bonds today, Yao Abalo, head of treasury at the central bank, said by phone. He declined to give reasons for the first ever cancellation of the duration. A 300 million-cedi five-year bond sale was canceled in March while the country sold barely half of the 400 million cedis three-year notes that it offered on April 24.
Companies are still seeking dollars to pay for imports into West Africa’s second-biggest economy, Darku said. “The supply on the market can just not meet the level of demand.”
Ghana, which allows foreign investors to buy cedi bonds of three-year duration and above, has depended on the inflows to help shore up its foreign reserves.
“Considering the funding needs of banks, the seven-year is too long for them to want to invest in it,” Anthony Kofi Asare, head of treasury at Ghana Commercial Bank, the nation’s biggest lender, said by phone. “The central bank has increased the cash-reserve ratio for banks, so they are really tight at the moment.”
The Bank of Ghana raised the cash-reserve ratio for lenders to 11 percent from 9 percent on April 10.
To contact the reporter on this story: Moses Mozart Dzawu in Accra at firstname.lastname@example.org