What's Happening?
Ghana has implemented new regulations limiting the extent to which local fund managers can invest in foreign securities. The Securities and Exchange Commission (SEC) announced that local funds can now invest only up to 20% of their assets in foreign securities,
a significant reduction from previous allowances. This move is part of broader efforts by President John Dramani Mahama to retain capital within the domestic economy and strengthen economic stability. The regulation also stipulates that investments in foreign securities are only permissible in jurisdictions with information-sharing agreements with Ghana's SEC.
Why It's Important?
The decision to limit foreign investments by local funds is aimed at bolstering Ghana's economic stability and increasing its foreign exchange reserves. By retaining more capital within the country, Ghana seeks to enhance its macroeconomic resilience and reduce vulnerability to global financial shocks. This policy aligns with President Mahama's vision of utilizing Africa's financial resources for its own development rather than relying on Western financial institutions. The move is expected to support the cedi, Ghana's currency, and contribute to the country's economic recovery following a severe economic crisis.
What's Next?
Ghana aims to grow its foreign exchange reserves beyond $20 billion by 2029, a target central to its economic strategy. The country is also expected to complete a three-year support program with the International Monetary Fund in August. These efforts are part of a broader strategy to restore macroeconomic stability and strengthen Ghana's economic resilience. The new investment regulations may prompt local fund managers to seek alternative domestic investment opportunities, potentially stimulating local economic growth.
