The Ghanaian cedi (GHS) was hit by significant depreciation year-to-date (-12% as of 19 March), despite relatively low inflation (+9.2% y/y in January, compared to double-digit figures for most of the past decades). Given that weak inflation track record, a policy rate cut in February was considered as premature. Low FX liquidity is another weak track record, reflected in just three months of import cover for quite a long time. But it improved during the last two years and stood at five months as of end-2018. Yet, Ghana has to carefully manage its bond redemption calendar and match with convenient issuances in order to avoid liquidity drains. In recent weeks, some bonds matured while new bonds did not come timely. The issue should be solved with the issuance of a USD3bn Eurobond designed to finance infrastructure. However, the latest events show that currency volatility is likely to continue with a consequence on the cost of financing in GHS (has been consistently above 20%).
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Weekly Export Risk Outlook 21 March 2019