Despite moves by government to save the cedi from further fall, it appears the local currency is still struggling to keep its head above the water.
The dollar last week hit four cedis at forex bureaus across the country after rallying between 3 cedis 80 and 3 cedi 90 peswes for some weeks now.It started the month of May at 3 cedis 85 pesewas, hitting at least 4 cedis, 3 pesewas by the third week of May.
Cedi’s performance against the dollar 2015
According to the Bank of Ghana from January to May 8, 2015, the cedi cumulatively depreciated by 17.2 percent against the USD, compared with 21.3 percent recorded in the same period in 2014.
Citi Business News checks reveal in January 2015 at forex bureaus the cedi depreciated against the dollar by over 5 percent, in February by close to 3 percent, in March by close to 10 percent and between 1 and 2 percent for April and May this year.
Cedi’s woes
A lot of reasons has been assigned to the cedi’s poor performance this year but prominent among them is government’s high debt levels and the significant drop in the country’s foreign currency reserves.
Ghana is still suffering significantly from a dip in revenue from cocoa, gold and oil following the plunge in the prices of these commodities on the world market.
These commodities prior to the drop were fetching the country millions of dollars which supported the bank of Ghana’s foreign currency reserves.
According to the Bank of Ghana gold prices could come under some pressure in the first half of 2015 as financial markets continue to anticipate the Federal Reserve rate hikes.
Prices are projected to remain within the range of US$1,180 and US$1,250 per ounce.
Brent crude oil prices are expected to average $59 per barrel in 2015, with prices rising from an average of $62 in the second quarter to $67 per barrel in the fourth quarter.
Cocoa prices are projected to peak in 2015 as supply weaknesses push up prices.
Cocoa prices are projected to average US $3,052 per tonne in the second quarter.
IMF cash to help cedi
Ghana’s talks with the International Monetary Fund (IMF) together with funds agreed on by the two following the talks was expected to help the cedi from further fall.
The agreement will see the fund dish out 940 million dollars which will be distributed in three tranches.
Of this amount 114 million dollars, which is the first tranche of the cash, has already been dished to Ghana to help shore up the value of the cedi.
A Deputy Minister Finance Mona Quartey had told Citi Business News at the time that she was confident the cedi will benefit the most when the cash arrives.
“It should be here anytime now, in fact the bank of Ghana is expecting it sometime tomorrow and it will support balance of payment and have an impact on exchange rate. As I mentioned earlier even by the announcement of the program with the IMF the exchange rate came off a little bit. When the money comes in and support balance of payment, we should see exchange rate come off slightly and stabilize, that is the intended impact.”
But some economists had downplayed the impact the IMF cash will have on the performace of the cedi.
According to economist Dr Ebo Turskson an initial tranche of one hundred and fourteen million dollars from the IMF, will have no impact on the cedi.
“Part of the reason why we have gone to the IMF is to stabilize our foreign currency and this is the time that our cedi has started depreciating like it did last year around the same period so we are saying that the IMF has approved this at this time but this is not going to be the solution to our cedi depreciation problem because these are short time measures.” He told Citi Business News.
Impact of IMF cash on cedi
According to some economists the cedi has not experienced the level of stability expected by government since the IMF cash arrived.
The IMF’s 114 million dollars hit the Bank of Ghana’s accounts on the 13th of April, 2015 but over a month on, the cedi is struggling to stay afloat.
Meanwhile the cedi’s performance against other foreign currencies has also been poor.
The British pound for example started the year at 4 cedis 88 pesewas on the interbank market but it is now at 6 cedis, 1 pesewa.
The Euro also started the year at 3 cedis 82 pesewas on the interbank market but it is now at 4 cedis, 31 pesewas.
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By: Vivian Kai Lokko/citifmonline.com/Ghana
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