The Bank of Ghana (BoG) has attributed the cedis’ recent gains to a new set of monetary measures it has instituted.

According to the Director of Financial Markets at the Bank of Ghana, Stephen Opata, the cedi’s performance can be linked to the BoG’s decision to restrict foreign exchange support to some essential commodities like petroleum products, as well as medical and pharmaceutical products.

He added that the cedi’s gains can also be attributed to the prudent management of liquidity in the financial system.

“We have also seen that Monetary Policy has been tightened, coming on the back of recent increases in the policy rate to 27 per cent. This has also contributed to the cedi’s good run”, he added.

He noted 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”.

Mr Opata is of the view that these could be some of the major reasons that have contributed to the cedi’s stability against the dollar over the past three weeks. 

Background

The cedi has witnessed some sustained gains against the US dollar when it was on the forex market.

The local currency has moved from ₵15 since November 2022 to around ₵10 to a dollar based on the average quotes published by some commercial banks in the country.

Meanwhile, some financial analysts have linked cedi’s quick turnaround to government’s staff agreement deal with the IMF. 

Databank Financial Service in its weekly report earlier predicted that the good run of the cedi will be sustained in the coming weeks.

Some analysts have pointed out that signals by the US Federal Reserve to start slowing down the rate hikes have also contributed to the cedi’s stability.

Cedi’s performance

According to Bloomberg, the cedi gained more than 10 per cent against the dollar from December 5, 2022, to December 9, 2022.

This, made the cedi gain the biggest advancement, among 150 currencies in the World Tracked by Bloomberg News.

Bloomberg in its tracker showed that the Ghana cedi gained about 10 per cent, compared to other top four currencies around the world on December 12 2022.

Sustaining the cedi performance

Mr Opata maintained that sustaining the cedi’s performance will not only depend on the supply of the currency.

“The issue will also depend on the current ongoing reforms in the economy that is being undertaken by government”.

He stated that the staff deal with the IMF is a major development that will help stabilize the cedis.

On her part, economist Dr Priscilla Twumasi Baffour has noted that the BoG must work hard to deal with the activities of speculators.