The Bank of Ghana (BoG) has given firm assurance that it will use all tools at its disposal to guard against the undue volatility of the Cedi.

This is coming at a time the local currency has come under what can be described as sustained pressure over the past three weeks.

The Central Bank noted that it's unaware of these developments on the interbank market, resulting in its immediate intervention.

It added, "we are also monitoring happenings in the global market and will take the necessary actions needed."

What is causing cedi's depreciation?

The cedi has come under some pressure over the month.

This has been sustained over the past two weeks, first in the last week of June 2021 and secondly the first week of July 2021. 

Market analysts are attributing it to the surge in corporate demand by businesses that are trying to pay dividends to shareholders, outside the country.

The demand for dollars has also picked up due to some businesses looking for dollars to finance imports, as governments around the world ease Covid-19 restrictions as a result of the deployment of vaccines and being in a better position to manage the spread of the pandemic.

The cedi which was trading at around 5 cedis 80 pesewas a week, is now selling at ¢5.91 against the US dollar.

BoG and the cedi’s outlook

The Bank of Ghana has however noted that despite the current challenge, it is optimistic about a stable outlook for the local currency in the coming months.

According to the Head of Financial Markets at the BoG, Stephen Opata, the Central Bank is in a strong position in terms of reserves, which has hit a little over $11 billion to supply dollars to the market.

He also talked about some inflows from the donor partners as well as Foreign Direct Investments that should help improve the country's reserves, going forward to give some comfort to investors.

The regulator also talked about its dollar auction programme which should give some comfort to investors in the coming months, to deal with the demand for dollars. 

However, some analysts have argued that there will be some level of depreciation, however, it will be better than what the country experienced for the past year. 

Impact of current situation on the economy

According to some analysts that Joy Business engaged about this development, it could “possible” increase the cost of of petroleum products in the coming months.

It could also in the coming months increase the cost of production for businesses and cost of living as well.