WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?

 

WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?

THIS MORNING, I SAW AN INTERESTING BANNER HEADLINE IN THE “NEW DAY” PROGRAMME OF TV 3 GHANA. IT SAID THAT THE U.S.A. IS EXPLORING OPPORTUNITIES TO MAKE WEST AFRICA AN EXPORT OPPORTUNITY FOR AGRICULTURAL PRODUCTS. IT SOUNDS A LITTLE BIT RIDUCULOUS – A SIMPLE COMMENT. Continue reading “WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?”

THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA

WORLD DEVELOPMENT REPORT 2020

THE WORLD BANK HAS JUST PUBLISHED THE WORLD DEVELOPMENT REPORT 2020.(YOU CAN DOWNLOAD THE REPORT AT THE BEGINNINF OF THIS ARTICLE.) IN THIS REPORT, THE WORLD BANK DISCUSSES THE USE OF GLOBAL VALUE CHAINS (GVC), ESPECIALLY FOR DEVELOPING ECONOMIES. GLOBAL VALUE CHAINS DEMAND MORE INTERNATIONAL COOPERATION. ON THE AFRICAN CONTINENT, THIS REGIONAL INTERNATIONAL COOPERATION WAS RECENTLY INITIATED THROUGH THE AFRICAN CONTINENTAL FREE TRADE AREA (AfCFTA). WHAT IS THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA? Continue reading “THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA”

SEPTEMBER MEETING BANK OF GHANA MPC – PART 2

MPC-Press-Conf-Release_Sept_20_2019

Summary_of_Economic_Financial_Data_September-2019

]IN THIS SEPTEMBER MEETING BANK OF GHANA MPC – PART 2 OF MY ARTICLE SERIES I WILL DISCUSS FOREIGN EXCHANGE RATES, COMMODITY PRICES, AND EXTERNAL SECTOR DEVELOPMENTS.

1) FOREIGN EXCHANGE RATES
ACCORDING TO THE PRESS RELEASE OF THE MPC, THE FOREIGN EXCHANGE MARKET “REMAINED RELATIVELY CALM”. (MPC PRESS RELEASE, NO. 10) I DON’T KNOW WHAT THE MPC UNDERSTANDS BY “RELATIVELY CALM”. I STILL SEE ONLY DOWNWARD TRENDS. THE CEDI LOST, LOST, AND LOST AGAINST THE US-DOLLAR, THE EURO, AND THE POUND STERLING. THIS IS ESPECIALLY DISAPPOINTING AS THE POUND AND THE EURO ARE WEAK THEMSELVES. AND UNFORTUNATELY, THIS TREND CONTINUED IN THE LAST DAYS. THE CEDI IS NOW MORE THAN 5.31 AGAINST THE US-DOLLAR. AS THE GHANAIAN ECONOMY DEPENDS TO A LARGE EXTEND ON IMPORTS, THE WEAK CURRENCY IS SURELY NOT ENCOURAGING.

THERE ARE SEVERAL WAYS THE CENTRAL BANK CAN INFLUENCE THE FOREIGN EXCHANGE RATE. WE CAN SUMMARISE ALL OF THEM UNDER “FOREIGN EXCHANGE CONTROL’. TO GO INTO DETAILS HERE IS PROBABLY A LITTLE BIT FAR-FETCHED.

THE PROBLEMS WITH THE CURRENCY IN GHANA ARE LESS A PROBLEM OF THE CENTRAL BANK AND THE MONETARY POLICY. THEY ARE MORE A PROBLEM OF FISCAL POLICY. IF THE GOVERNMENT SUCCEEDS TO INCREASE THE REVENUE – ESPECIALLY THE TAX COLLECTION – IT WILL HAVE A POSITIVE EFFECT ON THE CURRENCY.

ACCORDING TO THE BANK OF GHANA, THE GOVERNMENT IS ALREADY IN SIGHT OF SOME MEASURES TO BETTER TAX COLLECTION. LET’S HOPE THAT THESE MEASURES WILL HAVE A POSITIVE EFFECT. GHANA CANNOT AFFORD A MUCH WEAKER CURRENCY.

2) COMMODITY PRICES
FORTUNATELY FOR GHANA, THE RELEVANT COMMODITY PRICES DEVELOPED FAVOURABLY FOR THE COUNTRY.
ONLY THE COCOA PRICE IS A LITTLE BIT ON THE DOWNSIDE. BUT AT LEAST THE REALISED PRICE IS STILL ON THE UPSIDE YEAR-TO-DATE.
GOLD IS ON A LONG-TIME PEAK, REFLECTING A NEGATIVE SENTIMENT ABOUT THE GLOBAL ECONOMY. IF INVESTORS ARE DOUBTFUL ABOUT THE DEVELOPMENT, THEY USE TO FLEE INTO SAFE HAVENS. GOLD IS ONE OF THEM. THE TRADE WAR BETWEEN THE USA AND CHINA AND THE WEAKNESS IN EUROPE ARE REASONS ENOUGH TO GO INTO GOLD.

THE RECENT TENSIONS BETWEEN THE USA AND IRAN ALSO MADE THE OIL PRICE GO UP. USUALLY GOLD GOES UP WHEN OIL PRICE GOES DOWN. THAT IS BECAUSE DEMAND FOR OIL PLUNGES IN THE PROSPECT OF WEAKER ECONOMIC DATA. PEOPLE WON’T BUY CARS, AND USE LESS PETROL. DUE TO THE CRISIS INVOLVING SAUDI ARABIA AND IRAN, THE PROBLEM WAS LESS ON THE DEMAND SIDE. IT WAS THE FEAR OF LESS SUPPLY THAT PUSHED THE PRICE UP.

GENERALLY, GHANA CANNOT RELY ON COMMODITY PRICES REMAINING HIGH. ESPECIALLY THE OIL PRICE IS EXTREMELY VOLATILE. BY ALL MEANS, GHANA MUST INTRODUCE MEASURES TO ADD VALUE TO THE CRUDE OIL. ONLY THROUGH THAT CAN THE RELIANCE ON COMMODITY PRICES A LITTLE BIT LESSENED. ADDING VALUE IS PRINCIPALLY A GOOD MEANS TO INCREASE EXPORT POSSIBILITIES.

3) EXTERNAL SECTOR DEVELOPMENTS
ESPECIALLY THE THREE COMMODITIES MENTIONED ABOVE GAVE GHANA A REASONABLE TRADE SURPLUS OF 2.6 BILLI ON US-DOLLARS OR 3.9% OF GDP.

STRANGE IS THAT CURRENT AND CAPITAL ACCOUNT OBVIOUSLY DON’T BALANCE – WHAT THEY SHOULD USUALLY DO. (CURRENT ACCOUNT=CAPITAL ACCOUNT+FINANCIAL ACCOUNT)

THE GROSS AS WELL AS THE NET INTERNATIONAL RESERVES INCREASED MARGINALLY. THIS IS A GOOD SIGN, ESPECIALLY AS THE IMPORT COVER ALSO INCREASED MARGINALLY TO 4.1 MONTHS.

IN THE LAST PART OF MY ARTICLE SERIES I WILL DISCUSS GOVERNMENT FISCAL OPERATION, MONETARY INDICATORS, BANKING SECTOR INDICATORS, AND STOCK MARKET PERFORMANCE. APART FROM THAT, THERE WILL BE A CONCLUSION AND FINAL ASSESSMENT.

STAY TUNED!