Investors are demanding tangible evidence that efforts to control the fiscal deficit are effective before they regain confidence in the cedi.
This is according to GCB Capital research. Despite authorities highlighting better-than-expected economic indicators under the International Monetary Fund program and increasing reserves, including over US$2 billion in gold, cautious investors want to see decisive government action to address the fiscal issues affecting the cedi’s stability.
Analysts suggest this caution stems from concerns about the cedi’s medium to long-term viability, viewing the reported inflows expected by the year’s end as only temporary solutions.
GCB Capital noted in a research report that while the Bank of Ghana and the Ministry of Finance have primarily relied on moral persuasion to reassure investors of adequate reserves to meet market demands, investors seem to be waiting for concrete evidence of fiscal discipline to support the recovery in other macroeconomic indicators.
The local currency has faced significant selling pressure recently, continuing to depreciate against major currencies.
This year alone, the cedi has fallen to record lows exceeding GH¢15 per dollar.
GCB Capital reported that the significant revenue shortfall in the first quarter of 2024 and the frontloaded expenditures have resulted in a higher primary deficit of 0.7 percent of GDP, compared to the target of -0.2 percent.
The report indicated that this fiscal outcome necessitates stronger revenue performance in the remaining quarters of 2024 and a commitment to fiscal consolidation and expenditure rationalization to restore balance, which is crucial for stabilizing sentiments.
Analysts pointed out that factors such as speculative demand, payments to independent power producers and contractors, accelerated import growth, and seasonal effects have intensified pressure on the cedi.
The post Investor confidence in cedi hinges on tangible fiscal deficit control – Report appeared first on Citinewsroom - Comprehensive News in Ghana.
Read Full Story
Facebook
Twitter
Pinterest
Instagram
Google+
YouTube
LinkedIn
RSS