Economy suffocates: Inflationary pressure, cedi depreciation
A monthly review of activities on the economy by investment brokerage firm, UMB Stockbrokers, found that the current power challenges, inflationary pressures and the cedi depreciation were the top three issues that weighed in heavily on businesses in April, his year.
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The fiscal consolidation as well as the current high cost of doing business also played a significant part, causing businesses to readjust their investment plans and resulted in a softening of business sentiments.
In the face of the irregular power supply, domestic businesses have had to grapple with high production costs, short falls in production, revenue loses and increased cost of doing business. Above all, these disruptions put a dent on their international competitiveness.
Aside from the foregoing concerns, other issues that posed challenges included competition from imports, upward review of utilities and high cost of borrowing. Inflation, for the month, as a result inched up from 16.5 per cent at the end of March to 16.6 per cent at the end of April.
The first tranche of the IMF bailout programme of US$114 million released to the Bank of Ghana during the month was also unsuccessful in shoring up the local currency.
The impact of external shocks on forex inflows, arising from price volatility for Ghana’s primary export commodities coupled with the current significant levels of debt servicing commitments continues to contribute to the pressure on the Cedi.
Stock market
The stock market extended its positive run in April as exciting first quarter earning results posted by a number of listed stocks and expectations of dividend announcements spurred risk taking. Share prices soared on the back of increased demand during the month, with 11 equities advancing.
However, as stocks went ex-dividend and some investors sought to cash-in, offers built up and that led to a number of equities shedding some gains.
On the back of the aforementioned, six other equities lost grounds.
Activity levels were, however, moderate as the drop in momentum and the slide in prices of a number of equities during the first quarter tempered risk taking.
Volume and turnover for the month, as a result, dropped, with no significant block trades being recorded.
Advancers help indices extend gains
The benchmark GSE Composite Index (GCI), on the strength of the advancers, gained 52.40 points in the month under review. This was an improvement over the 42.42 points recorded in March and 131.07 points less than what was recorded a year ago. The GCI closed the month at 2,272.77 points from 2,220.37 points in March.
The GCI’s climb saw the broader market index emerge from the negative territory it had been in since the beginning of the year to end April at 0.52 per cent. This was, however, lower the 5.13 per cent registered at the end of the same period last year.
The GSE Financial Index (GFI), which tracks banking and insurance stocks, was also upbeat during the month, adding 75.47 points to close at 2,297.62 points. The return on the GFI at the end of April stood at 2.40 per cent.
Money market
The first tranche of the US$114 million under the International Monetary Fund bailout gave indications that the government’s need for funds from the public in the short term will be reduced.
Additionally, lower bid rates accepted by the Bank of Ghana in the recent three-Year bond resulted in investors quoting lower premiums for their investments.
The yield on the 91-day bill declined from 25.28 per cent at the end of March to 25.12 per c cent at the end of April.
During the same period, the 182-day bill also shaved 20 basis points to 25.81 per cent.
On the other hand, the 1-Year and 2-Year Notes were unchanged at 22 per cent and 23 per cent respectively.
The Government of Ghana also issued the second GH¢400 million 3-year Note for the year. Subscriptions for the issue were however low as bids tendered were 58 per cent lower than the targeted amount.
The Bank of Ghana accepted only GH¢103.37 million from the GH¢168.63 million worth of bids tendered at a reduced rate of 22.49 per cent. This compared to the 23.23 per cent issued in February this year.
In all, a total of GH¢3.58 billion was raised by the BoG from bills and notes during the month. Funds raised this month was lower when compared to the GH¢5.55 billion sourced by the Central Bank to meet maturing bills of the Government during the previous month.