Ghana’s international reserves will be eroded by sharp decline in gold prices – Fitch Solutions

 FITCH Solutions has warned that a sharp decline in global gold prices triggered by a return towards more conventional trade policies in the US and the resolution of major global geopolitical flash­points will quickly erode Ghana’s international reserves.

According to the UK-based firm, the central bank would in this scenario struggle to maintain the cedi at current levels, leading to a renewed sell-off.

“This would keep inflation elevated, lead to a weakening in consumer and investor sentiment and prompt the central bank to keep interest rates higher for longer,” it captured as part of its downside risk forecast.

On the upside risk, it said 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.

It pointed out that the contri­bution of government consump­tion would be negative in 2025.

“This is because the govern­ment pursues fiscal consolidation in line with Ghana’s International Monetary Fund programme,” it said.

The report said a stronger exchange rate amid elevated gold prices would support the disin­flation process, ease pressure on household budgets, and support consumer spending in the quar­ters ahead.

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