Story By: Akua Oteng Amponsah
Ghana’s international reserves are at risk of being eroded by a sharp decline in global gold prices, according to Fitch Solutions.
The UK-based firm warns that this scenario would put pressure on the cedi, leading to renewed sell-off and keeping inflation elevated.
“A sharp decline in global gold prices triggered by a return towards more conventional trade policies in the US and/or the resolution of major global geopolitical flashpoints would quickly erode Ghana’s international reserves,” Fitch Solutions said. This would lead to a weakening in consumer and investor sentiment, prompting the Bank of Ghana to keep interest rates higher for longer.
The firm noted that this is one of the downside risks to Ghana’s economic outlook. On the upside, a further appreciation of the cedi would bring inflation down more quickly, supporting stronger private consumption and prompting the Bank of Ghana to ease monetary policy more rapidly.
“A further appreciation of the cedi would bring inflation down more quickly than we currently project. This would support stronger private consumption and prompt the Bank of Ghana to ease monetary policy more rapidly, which would stimulate credit uptake,” Fitch Solutions added.
The report also highlighted that government consumption will have a negative contribution to growth in 2025 due to fiscal consolidation efforts in line with the International Monetary Fund programme.
However, a stronger exchange rate and elevated gold prices are expected to support the disinflation process, ease pressure on household budgets, and boost consumer spending in the coming quarters.
“A stronger exchange rate amid elevated gold prices will support the disinflation process, ease pressure on household budgets, and support consumer spending in the quarters ahead,” the report concluded.
