Absa’s Africa financial markets index 2023, covering 28 African states in 2022 and published in October, made for grim reading for a few countries across the world's second-largest and second-most populous continent.
Among the lowlights were a fall in foreign-exchange reserves and liquidity in Uganda, a deterioration in reserves and price stability in Ghana, and falling reserves in Côte d’Ivoire and Madagascar.
Ghana’s FX reserves fell to just 0.6 months of imports in 2022, down from 2.4 in 2021, while aggregate reserves among the countries in the African Financial Markets Initiative were down 10%.
Additionally, “in spite of large trade and overall current account surpluses, Angola and Zambia did not record a meaningful increase in FX reserves last year, and 2023 has been even tougher,” notes Tatonga Rusike, sub-Saharan Africa economist at Bank of America. “The big boost in FX reserves post-pandemic was associated with the IMF’s April 2020 disbursements and August 2021 special drawing rights allocations. Since then, FX reserves have been on a declining trend.”
Liquidity conditions have deteriorated as tighter monetary policy from global central banks has strengthened developed market currencies, resulting in reduced demand for African currencies.
“The
