The annual nominal growth in Foreign Currency Deposits rose to 20.2 percent in February 2021, up from 8.5 percent in January 2021. However, this is lower than the 22.0 percent recorded in the corresponding period of 2020.

Even though it’s still below pre-COVID levels, the recent growth rate in Foreign Currency Deposits is the highest since October last year. Foreign Currency Deposits grew 27.3 percent in October 2020, the highest growth rate witnessed in 2020. Meanwhile, the annual growth in Foreign Currency Deposits declined sharply from 13.2 percent in December 2020 to 8.5 percent in January 2021.

The Bank of Ghana’s consumer and business confidence surveys conducted earlier this year pointed to lower confidence in the economy. This was based on concerns that the re-imposition of restrictions would further have detrimental consequences on the attainment of its short-term goals. As such, this may partly explain the decline in the Foreign Currency Deposits between December 2020 and January 2021. Also, rising uncertainties may slow economic activity which may result in lower demand for foreign currencies.

Net Foreign and Domestic Assets

Meanwhile, Net Foreign Assets (NFA) contracted by 15.4 percent in February 2021, down from 9.1 percent growth in January 2021. The current rate is very much below the pre-COVID levels of 80.6 percent in February 2020. The negative balance of the NFA may signify that the country is a net borrower. This may also mean that the country owns fewer assets overseas than its domestic assets owned by foreigners.

On the other hand, the country’s Net Domestic Assets have increased to 43.6 percent in February 2021, up from 32.9 percent recorded in January 2021. The annual growth in Net Domestic Assets is far above the pre-COVID-19 levels of 2.3 percent in February 2020. Data from the Bank of Ghana show that the country’s Net Domestic Assets have seen tremendous growth in 2020.

Developments in monetary aggregates in February 2021

The bank of Ghana stated that developments in monetary aggregates in February 2021 showed sustained growth in total liquidity. This, the Bank of Ghana attributed to the fiscal and monetary policy measures implemented to mitigate the adverse impact of the COVID-19 pandemic in 2020.

“These policies culminated in a significant expansion in the balance sheet of the Central Bank”.

The central bank further noted that the implementation of the measures resulted in an expansion in its base money. As of February 2021, base money recorded an increase of 34.8 percent. This is higher than a modest growth of 19.1 percent recorded in the corresponding period of 2020.

According to the Bank of Ghana, the increase in base money filtered through to the broad money supply (M2+). Broad money recorded a year-on-year growth of 29.1 percent in February 2021. This is also higher than the 14.5 percent recorded in the corresponding period in 2020.

“The observed increase in M2+ was reflected in an expansion in currency outside banks and total deposits”.

Real and nominal Private Sector Credit

Despite the significant growth observed in some of the monetary aggregate variables, credit to the private sector slowed significantly early this year. Real private sector credit contracted by 2.7 percent compared to a growth of 12.9 percent over the same comparative period. The Bank of Ghana attributed the slow growth in private sector credit to constrained demand for credit.

Similarly, the annual nominal growth in private sector credit slowed to 7.4 percent in February 2021. This is lower than the 21.8 percent recorded in the corresponding period of 2020. After recording an annual growth of 10.6 percent in December 2020, private sector credit declined to 6.6 percent in January 2021. In nominal terms, credit to the private sector currently stands at GH¢43.2 billion in End-February 2021, up from GH¢43.1 billion in January 2021. However, compared to December last year, nominal credit to the private sector shrunk by GH¢0.3 billion in February 2021.