Injecting more dollars to meet the daily demands of foreign exchange in the country may not be the best move in stabilising the cedi, CEO of Dalex Finance has said.
Ken Thompson says government seems to miss the most fundamental issues causing the cedi to depreciate and until those problems are addressed, pumping more dollars into the economy will yield no meaningful results.
Speaking at Joy FM’s Cedi Forum in Accra, the financial expert said managing the decline of the cedi and using balance from it to support the productive sector is a more viable approach to tackling the fall than pumping more dollars.
“Don’t throw good money after bad, it is an absolute waste of time,” he said.
The steep decline of the cedi against major trading currencies like the US dollar and British pound in recent weeks has become a major source of concern for businesses.
Analysts have attributed the sharp fall to the exit of investors from emerging markets like Ghana.
From ¢4.42 to the dollar in January this year, the cedi is now valued at ¢4.78 to the dollar at the interbank rates but is trading at ¢4.94 at some forex bureaux in Accra.
Graph: Trading Economics forecast on the cedi
This has resulted in a drop of 6.9 percent this year, more than the cumulative depreciation of 4.7 percent for the whole of 2017.
Although there is yet to be a shortage of the dollar on the market, the Central Bank says it will inject more of the foreign currency to stem the fall.
But Mr Thompson wants a more sustainable measure to be taken.
He said there is no way the cedi can be stabilised if it imports more than it exports.
“Over 75 percent of the containers that come into this country laden with goods go back empty. If you want to stabilise your currency fill those containers.”
On the $1.3 billion cocoa syndication inflow that is expected in the country in October to shore up the cedi, Mr Thompson said the lack of it cannot be attributed to the depreciating cedi.
He strongly believes that the cedi is overvalued and that “If you want your currency to be stable, if you want to create jobs, if you want your businesses to be competitive do the things that will make those containers go back with what you are selling.”
For him, the solution to the problem is basic, “You have the yam, you have a knife, don’t ask me how to cut it.”
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