There has been some disinvestment of local bonds by about 25% of foreign investors, Finance Minister, Ken Ofori-Atta has announced.

“COVID-19 has also sparked off capital flight as a result of related bearish emerging market sentiments and given the high proportion (about 25%) of local bonds held by non-resident investors. We are seeing an increase in demand for dollars which could impact negatively on foreign reserves”, Mr Ofori-Atta disclosed when he presented an Economic Impact Assessment of COVID-19 on Ghana’s economy.

According to him, Ghana’s successful and timely raising of US$3 billion from the Eurobond market in early February 2020 has been extremely, adding: “May I say, divinely helpful and provided us with the needed buffer to anchor the cedi.”

However, he said; “in these apocalyptic times, we must do all we can to conserve and preserve our foreign exchange reserves.”

He noted that the Coronavirus pandemic has led to tight financing conditions both in the global and domestic financial markets.

Accordingly, the slowdown in economic activities is likely to result in debt service difficulties, particularly, from the sectors that are hard hit such as aviation and hospitality, and containment measures such as social distancing may lead to reduced productivity and job losses.

Impact on exchange rate

The Finance Minister said the slump in import volumes and values will likely reduce the demand for forex for such imports, which may have a favourable impact on foreign exchange volatility.

On the other hand, reduction in exports from Ghana and investor capital flight could adversely affect the exchange rate volatility.

According to him, the jury is still out as to whether all these will result in a net gain for Ghana.