Banks are failing and stock prices are plunging in the United States and Europe, yet Ghana's economy remains relatively well-insulated from this global financial crisis, the Bank of Ghana has revealed in the last of its quarterly reviews for the year.
Speaking before a tightly-packed assembly of gathered media personnel, Dr Paul Acquah, central bank Governor, said "the effects of the turmoil have so far been limited,' and that the national bank"s liquidity is not threatened.
Though the bank does have some investments wrapped up in the form of nostro balances and placements in turbulent foreign markets, their review showed that these investments were within 'internationally acceptable prudential limits,' and that 'the banking system is not over-exposed.'
He said that the Bank of Ghana has reviewed the possible channels of transmission of the global financial crisis to the domestic environment, and remains confident that the economy is able to withstand global turmoil.
'For the year 2008, the current assessment is that economic activity has continued to be at a reasonably fast pace with strong export growth and underpinned by expansion in domestic demand and fiscal stimulus,' he assured.
Outstanding external borrowing by banks as a source of funding is less than five percent of total bank funding requirements, Dr. Acquah offered as an indication of the banks' predominant reliance on domestic deposits.
Nevertheless, the bank issued warnings that certain sectors of the economy could suffer slowdowns: Dr. Acquah fully expects remittances and private donations from industrialised nations to slowdown, likewise, Ghana could see a 'reduced appetite for investment in developing countries.'
And there were 'significant' movements in the exchange rate of the cedi over the last quarter relative to the major international currencies, echoing similar movements in the first half of 2008.
Against the US dollar, pound sterling and the euro, the cedi depreciated by 15.8, 6.2 and 14.0 percent respectively, despite the 2007 redenomination.
According to Dr. Acquah, this did not affect the external value of the cedi, and urged everyone to put the facts into a broader economic context.
Credit conditions, a major concern for entrepreneurs and small business owners, has tightened slightly, Dr. Acquah said, and could continue to tighten—but both credit and demand for credit by both households and enterprises continues to be strong.
Enterprises accounted for 73 percent of the increase in credit to the private sector over the last twelve months, up from 67 percent in the last review. The share of households declined to 22 percent, down from 31 percent over the same period.
Despite the economic turmoil, some commodities saw their value increase in the world marketplace. Exports of cocoa beans and products increased to $1.60 billion, up from $910.8 million in 2007.
Cumulative cocoa purchases for the season surpassed the government's expectations for the crop season, at 758,908 tonnes. Gold exports amounted to $1.751 billion in the first three quarters, increasing from $1.247 billion in 2007.
Dr Acquah did acknowledge that the Bank has kept a close eye on the global economic climate.
"The past three months of the year has seen extraordinary turmoil in international financial markets, and the onset of recession in industrial countries that is now spreading their effects globally,' he said, referring to the collapse of several major international banks, as well as the volatile fluctuations in the stock market and currency exchange rates that resulted from those bank failures.
However, when pressed to reveal their contingency plans in case of economic emergency in Ghana, the Governor failed to provide a solid lead. Instead, Dr. Acquah detailed preventative measures that the Bank of Ghana had enacted, including in-depth reviews and regularly conducted stability analysis of the banking system.
'Disruption is not the same as distress,' he said, referring to the global market. 'We don't implement pre-emptive policies in anticipation of a crisis that may or may not happen.'