Ghana Likely To Invest In Yuan

The Bank of Ghana board has given permission to its Treasury Department to invest less than 10 per cent of its reserves in emerging market securities. This permission may settle the surging argument about the need for Ghana to keep part of its reserves in the Chinese currency, the Yuan, because of China�s growing influence in many economies, especially in Africa. Central Bank Governor, Paa Kwesi Amissah-Arthur, told the media at a news conference organised by the Monetary Policy Committee (MPC) in Accra that part of Ghana�s international reserves could be in the Yuan only if the investment partners decide on investing in Chinese securities. The MPC organised the press conference to inform the public about recent developments in the economy for the last quarter and how the central bank would respond to them using its monetary policy tool, the Policy Rate, which helps to determine interest rates charged by the banks. The rate can therefore impact money creation and economic activity. The Monetary Policy Committee started its 47th regular meeting from October 17 to review developments in the economy after which it decided to maintain the policy rate at 12.5 per cent in spite the worsening global economic environment. The central bank cited a cocktail of reasons including continued disinflationary pressures in the economy, a 17.4 per cent year-on-year real growth in the BoG�s Composite Index of Economic Activity as well as an improvement in consumer confidence against a marginal dip in business confidence over the quarter ending September this year. The Bank of Ghana explained that their survey, however, indicated that both consumer and business inflation expectations remained confident on the attainment of single digit inflation for the year. The bank said the GH�1.3 billion fiscal deficit was well within the GH�1.5 billion target for the quarter. Governor Amissah-Arthur explained the central bank was unable to say specifically whether keeping reserves in Chinese Yuan would be a sure option, but a high ranking official from Treasury said investing in Chinese securities currently rated ��BBB+� which would mean Ghana has part of its reserves in the Yuan, was being watched with caution. �What we are looking for are the best investments which will give us the best returns�, the governor said. The central bank has about 14 corresponding banks which it would use to make high-yielding investments in emerging market securities and assets. Over the past couple of months, analysts have been divided over whether the time was ripe for the country to keep part of its reserves, currently standing at $5.3 billion, or to 3.8 months of import cover as of October 13, 2011. The proponents believe that the Chinese influence across Africa and on world trade, Ghana�s changing taste in favour of Chinese goods and taking a cue from neighbouring Nigeria, which has gone that way was a good cue. On the other hand, other economic watchers say Ghana has to monitor the situation for a long time to be able to take a firm position. On international trade, Mr Amissah-Arthur said the first nine months of this year recorded a provisional balance of trade deficit of US$1.7 billion, compared to the US$2 billion deficit of the corresponding period last year. In nominal terms, the BoG reported, the cedi depreciation by 3.2 per cent against the dollar between January and September 2011, compared to the 0.1 per cent appreciation it chalked for the same period last year. However, in trade weighted terms, the cedi recorded a nominal effective depreciation of 2.2 per cent by end September and a weighted real effective depreciation of 0.2 per cent during January to August 2011.