There are mixed reactions to the prediction that the cedi will depreciate to 6 cedis to a dollar by 2022.
The Economist Intelligence Unit (EIU) based in the UK, has predicted that the local currency will perform poorly against the dollar within the next four years due to some external pressures and political uncertainties.
But some currency analysts have expressed diverse opinions with strong arguments for their stance.
The Economist Intelligence Unit (EIU)’s claims are based on the fact that the US Federal Reserve will likely increase its rate which will affect developing economies like Ghana.
Also, that the political uncertainty associated with Ghana’s general elections in 2020, might trigger speculation among investors which will reduce the supply of the dollar in the system.
For Economic Analyst with GN Research, Emmanuel Zewu, this prediction is possible.
His basis are that the relative stability of the cedi have least been backed by strong sustainable policies.
“We need to ask ourselves what has accounted for this improvement, is it because the economic fundamentals are improving or we are managing the situation temporarily. We should look at the bonds that have been issued as well as the Bank of Ghana’s decision to release some dollars into the system especially in the early stages of the year. All these things should have accounted for the marginal improvement that we have seen last year,” he argued.
For 2017, the cedi ended at 4 cedis 41 pesewas to a dollar.
As at Thursday January 3 2018, the cedi has depreciated marginally and it is selling at 4 cedis 42 pesewas.
Treasury manager disagrees
But the General Manager for Treasury at HFC Bank, Joseph Nketsia disagrees with the projection by the EIU.
Though he admits to the cedi’s seasonal depreciation, he believes the move may least hit the 6 cedis mark.
“We know with the oil exploration, our foreign exchange resources are likely to increase considerably. It is true that on a year on year basis the cedi depreciates but I don’t think that the cedi will depreciate to 6 cedis to a dollar by 2020.”
Mr. Nketsia also argues that the reasons cited by the EIU may just be too early and highly speculative.
“If we are say in January 2019, we could perhaps predict the performance of the government at the elections and the uncertainties surrounding the elections. But as it is now, it is highly speculative to say that in 2020 people will be hoarding currency because of the uncertainty surrounding the elections,” he added.
Government could reverse trend
Meanwhile it may seem government could work to avert the occurrence altogether.
Emmanuel Zewu suggests that could be achieved with a more robust strategy t grow the tourism and non-traditional export sectors to attract more foreign exchange and deal with the perennial causes of the massive depreciation of the cedi.
“We look at the tourism industry which gives inflows of foreign direct investments. Also with the exports, if you look at the non-traditional products that we are trying to explore the African markets, we should be able to create the necessary environment for these farmers to produce more and to be at a competitive price so that when they go to the international market, our commodities could be very competitive,” Emmanuel Zewu advised.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana