Currency analyst, Samuel Ampah has disclosed to Citi Business News he expects the new central bank governor to implement policies to stabilize the local currency.
The cedi which depreciated by 14 percent in the first quarter of 2014, only depreciated by a percentage point for the same period this year.
Speaking to Citi Business News, Samuel Ampah urged Dr. Issahaku to consider a continuing the central bank’s current policy of an increased supply of foreign currency to meet demand as well as the repatriation of export revenue to Ghana.
“What the central bank is doing at the moment; that is stabilizing the currency in terms of ensuring that the inflows are coming in, has to do with demand and supply, so therefore if the inflows are there it could meet any demands that comes into the market. Also, the repatriation of the export revenues is yielding some positive results and I guess he will ensure that such policies are strengthened more. There is a target and we should reduce the level of depreciation of the local currency.” Samuel Ampah stated.
Cedi depreciation
The cedi began losing its grip on other major trading currencies mid-2013.
This was largely caused by policy slippages, external shocks arising from declining global prices in oil and gold as well as rising interest costs.
The situation also affected Ghana’s net international reserves which had weakened significantly.
As a result, the country started to record double digit inflation and a rising public debt.
Rate of depreciation
Figures released by the central bank for instance revealed that the local currency accumulatively depreciated by 14.6 percent in 2013.
This figure further increased to 31.2 percent in 2014.
The local currency however showed some signs of recovery when it bounced back with a decline in depreciation amounting to 15.7 percent in 2015.
The Bank of Ghana at the time, attributed this marked development to the tight monetary and fiscal policy stance, inflows from donors, the pre-export finance facility for cocoa and proceeds from the Eurobond issue.
BoG Interventions unsuccessful
Some of the interventions introduced by the central bank to stem the cedi from further fall included; a daily injection of 200 million dollars to increase liquidity on the market.
Also, commercial banks were required to quote a two-way pricing of currency exchange and limit the spread on corporate transactions to a maximum of 200 percentage points.
In addition, no cheques or cheque books were to be issued on the Foreign Exchange Account and Foreign Current Account.
Furthermore, cash withdrawals over the counter from FEA and FCA was to be permitted for travel purposes outside Ghana and shall not exceed US$10,000.00 or its equivalent in convertible foreign currency, per person, per travel and as well all transfers outside Ghana from FEA and FCA were to be supported by relevant documentation.
The inability of these interventions to address the volatility on the foreign exchange market, culminated in the continuous free fall of the local currency in relation to the international trading currencies.
Some analysts had predicted a poor performance of the cedi for this year but a first quarter report released by the central bank has shown that as at Thursday, March 17, the cedi had depreciated by 1.4 percent compared with a depreciation of 11.2 percent in the same period last year.
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By: Pius Amihere Eduku/citibusinessnews.com/Ghana