The Bank of Ghana (BoG) has allayed fears of the market on the impact of MTN’s initial public offer (IPO) on the cedi.
Through the IPO on the Ghana Stock Exchange (GSE), MTN intends to cede 35 per cent of its ownership to Ghanaians for an amount of GH¢3.48 billion, prompting some market participants to be concerned about the impact of the potential externalisation of the cedis raised on the local currency, a situation the central bank believes has contributed to some initial reactions, which is affecting the cedi.
Speaking in an interview with the GRAPHIC BUSINESS, the Director, Financial Markets Department of the BoG, Mr Steve Opata, said MTN had, however, assured the treasury managers in banks that they had no immediate plans to externalise these payments.
“This assurance should, therefore, mute that aspect of the market sentiments,” he stated.
He said the BoG was also engaging the management of MTN Ghana to ensure that any forex outflows arising from the transaction is done in a phased and orderly manner.
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No cause for alarm
Mr Opata also assured the pubic that the BoG was putting in measures to address the cedi’s shaky performance over the past two weeks.
From the week beginning May 21, the market has observed some movements in the exchange rate market, which has seen the cedi lose ground to the US dollar.
He said its assessment of the cedi reflected a spillover from external developments.
“Global financing conditions for emerging markets are changing because of oil prices rise, the US dollar strengthens, and the US interest rates rise. These developments, which initially impacted emerging markets are beginning to spillover to frontier market economies in Sub-Saharan Africa, including Ghana,” he explained.
Impact on markets
Mr Opata, however, pointed out that the impact on emerging markets and frontier markets had varied depending on country-specific underlying fundamentals.
“In the case of Ghana, we strongly believe that staying on track with the government’s fiscal consolidation plan, the strong trade surplus, narrowing current account balances, significant build-up in international reserves which now stands at US$8.1 billion and the declining inflation rates should moderate this impact,” he explained.
Appropriate policy actions
The Director noted that while these global and domestic developments did not yet pose a threat to inflation in the country in the near future, the BoG was still monitoring the situation to take appropriate policy actions as required.
He said the central bank in recent months ensured that there was enough liquidity to cater for any shortfall that would lead to the cedi coming under pressure against the dollar and noted that that intervention would continue.
“The events of the past two weeks have led to the bank increasing its forex supply to the market,” he stated.
He said proceeds from the country’s recent Eurobond had also provided additional forex to the central bank that could be called on to help the forex market.