Dr. Abdul Nahir Issahaku speaking at the press briefing
Dr. Abdul Nahir Issahaku, Governor of the Bank of Ghana (BoG), has allayed fears that United Kingdom’s vote to leave the European Union (EU) will have any immediate impact on Ghana’s economy.
“I can’t see any immediate danger to the economy, but it will depend on the negotiations which will take about two years, and within that two years there will be a lot of uncertainties.
Dr. Issahaku, who was speaking at a press briefing in Accra on Monday, said based on Ghana’s strong relations with both the EU and the UK, the impact of Brexit is likely to transmit through the trade sector, Foreign Direct Investments (FDI), budgetary support and the domestic currency market.
“If the uncertainty is sustained it will affect demand conditions in both the EU area and UK. And when demand condition in these areas is deteriorating, it will also affect our exports. FDIs from these areas will also decline and our forex levels and the exchange rate will be affected,” he explained.
Dr. Issahaku said, “At this level, we can only speculate. A lot will depend on the negotiations going forward.”
However, the Governor said initial assessments indicate that the local currency appreciated sharply by about 5.7 percent month-on-month against the pound sterling in June 2016 compared to 1.3 percent depreciation in May, reflecting the Brexit effect.
Going forward, he said the potential fallouts from post-Brexit negotiations will be closely monitored to take the necessary policy actions to dampen any adverse effects on the domestic economy.
Brexit Effect
The United Kingdom’s (UK) vote to leave the EU has dominated global developments, and it had implications for global currency, commodities and equity markets.
Although the sharp depreciation of the pound sterling against major trading currencies has somewhat reversed, the current uncertainties and volatilities in global financial markets may persist until the post-Brexit negotiations commence with the EU.
By Cephas Larbi