The Ghana cedi has been on a free fall against the major foreign currencies since January this year, after firming up against the currencies for the most part of last year. As at Monday, commercial banks’ indicative prices quoted by the Bank of Ghana revealed that $1 was being sold at GH¢1.54, compared to GH¢1.45 at the beginning of the year. So far, the depreciation of the local currency is the highest value drop since it was redenominated in July 2007. The rising dollar is attributable mainly to a rebound in the US, UK and European economies and also the increasing importation of goods into the country as against low exports. The rising crude oil prices appear to have also mounted pressure on the cedi with respect to the dollar. Furthermore, analysts believe a recent proposal by US President Barack Obama to cut corporate taxes and boost spending for education, innovation and infrastructure in the world’s largest economy, in addition to creating jobs and spurring growth, might be reasons for the dollar’s increase in value. Paa Kwesi Amissah-Arthur, Governor of the Bank of Ghana, has assured investors that the current decline in the value of the local currency is temporary. According to Mr. Amissah-Arthur, the minimal impact is indicative that the measures put in place to counter the effect are working. Razia Khan, Regional Head of Research, Standard Chartered Bank PLC, told Joy Business Monday that the depreciation of the cedi, since the year began, is very significant though he expressed the hope that the Central Bank would find a remedy for the situation. Collins Appiah, Head of Research of Gold Coast Securities, also expressed confidence that the fall in the cedi will not last long. As at the close of trading Monday, the cedi had depreciated by 4.05, 8.34 and 6.20 percent respectively against the dollar, the pound and the Euro. Some traders, including rice importers and spare parts dealers, have already indicated their intention to pass the burden onto consumers. This means the price of items will go up accordingly. An exporter, Blue Skies, has also expressed worry about the losses among others. It noted that anytime the local currency fell, it posted losses. Raw materials imported from overseas by manufacturing firms would also impact on prices on the local market. Consumers therefore stand at a great disadvantage as they would need more money to buy goods. An unstable exchange rate will also prevent foreign investors from putting their capital in Ghanaian equities, since they will record losses at the time they would be retrieving their investments. Some treasury analysts that BUSINESS GUIDE spoke to during the Christmas period expressed worry about the scarcity of the dollar in the system. The free fall of the cedi impacts on both importers and exporters and could trigger inflation hikes. Prices of goods tend to go up anytime the Ghana cedi falls against the US dollar especially since the local currency is pegged to the American currency. It is also likely the phenomenon could affect the Gross International Reserves position of the Bank of Ghana or the Balance of Payment of the country, most analysts and market watchers have indicated. At the end of September 2010, the cedi had appreciated by 2.1, 7.8 and 15.4 percent against the dollar, pound and euro respectively. This is mainly attributed to an improved Balance of Payments (BOP) which is largely supported by the International Monetary Fund (IMF) and gross international reserves then at 3.1 months of Import Cover. Source: Business Guide/Ghana