The Director of Financial Markets at the Bank of Ghana (BoG), Stephen Opata, has stated that the the tightened Monetary Policy by the central bank is what has resulted in the good performance of the Cedi against the Dollar.
He explained that the local currency is performing well on the back of the increase in the policy rate to 27 percent.
“We have also seen that Monetary Policy has been tightened, coming on the back of recent increases in the policy rate to 27 percent. This has also contributed to the cedi’s good run”, he said.
He added that “the continuous hike in the policy rate will also ensure that excess cedis can be used to purchase government bonds and other securities, despite current concerns with the proposed debt exchange programme”.
The Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye also said the Cedi’s improved performance against the Dollar is largely due to reduction in speculations in the financial market.
The Cedi has over the past few days, especially since the start of December 2022, been gaining strength against the major trading currencies particularly, the Dollar.
Per the Bank of Ghana (BoG) rate, the Cedi, as of Thursday December 15, was buying at GHS7.9975 to a Dollar and and selling at GHS8.0056 to a Dollar.
Bank of Ghana Exchange Rates pic.twitter.com/HREBnMQezt
— Bank of Ghana (@thebankofghana) December 16, 2022
Dr Kwakye asked the government to act immediately to consolidate the gains made.
In a tweet, he said “Unless the cedi is backed by improved economic fundamentals, its stability will not last. The current stability is riding only on the back of reduced speculation.”
He added “The cedi appreciation is a correction to largely speculation-fueled depreciation. However, the extreme volatility in the exchange rate is not good for the economy.”
“The question is how long will the cedi stability last? We have been here before. The way to ensure lasting cedi stability is to address the economy’s structural weaknesses while building strong financial buffers,” Dr Kwakye further stated.
It is recalled that analysts earlier expressed confidence that the Cedi was going to pick up against the Dollar.
For instance, Chief Operations Officer at Dalex Finance Mr Joe Jackson stated that people were finding it difficult to buy Dollar hence, were giving up.
Speaking on the Ghana Tonight show on TV3 with Alfred Ocansey on Wednesday October 19, he said “It is a tough time but I expect that the rate will slow down. The rate will slow down because at this moment, it is very hard to find dollars to buy and most of the people we have given up on buying Dollars and are slowing. I am also expecting that the government will soon announce measures that will indicate to the market that it is serious about the reducing its expenditure.
“The measures, the biggest one is going to be debt restructuring, when that happens I expect the rate of the Cedi depreciation to slow down.”
Recently, the Second Deputy Governor of the Bank of Ghana Elsie Addo Awadzi also said the fall of the Cedi against the Dollar and also the high inflation rate (32.7%) were temporary.
She expressed confidence of a positive outlook for Ghana’s economy.
Speaking at the 21st Annual National RCB CEOs conference on the theme ‘Positioning Rural banking at the Centre of Financial Services delivery in Ghana – the role of stakeholders” she explained that recent global developments have heightened economic and business uncertainties for businesses and individuals. Our domestic economy is not spared from these developments.
The Bank of Ghana, she said was working closely with the Ministry of Finance and other key stakeholders to negotiate a sound economic reform programme supported by the IMF, to stabilise and transform our economy.
“We at the Bank of Ghana are confident about the outlook for our economy. The current high inflation and cedi depreciation are temporary, and we must avoid speculative behaviour that only works against attaining stability sooner,” Mrs Addo Awadzi stated.
The BoG recently identified five key reasons for the woes of the local currency.
They were “The strength of the US dollar, Investor reaction to Credit Rating Downgrade, Non-Roll over of Maturing Bonds, The sharp rise in crude oil prices and impact on the Oil Bill, Loss of External Financing.”
The central bank went ahead to announce measures introduced to resolve the situation.
They were the “Gold Purchase Program to increase foreign exchange reserves; Special Foreign Exchange Auction for the Bulk Distribution Company’s (BDCs) to help with the importation of petroleum products; Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.
“The Bank of Ghana is supporting the banking sector with foreign currency liquidity to help meet the demand for external payments. The recently approved USD750,000,000 Afrexim loan facility by Parliament, once disbursed, will boost the foreign exchange position of the country and help restore confidence.”
The recently signed 1.13billion dollar Cocoa Syndicated loan was also a measure to shore up the Cedi, the BoG added.
By Laud Nartey|3news.com|Ghana