Ghana: Dollar Resumes Its Rise After Brief Fall

The Ghanaian cedi has resumed its depreciation against the US dollar in recent days, after a brief period of stability. As of Tuesday, July 12, 2023, the cedi traded at 10.50 to the dollar, down from 10.40 the previous week. The decline in the cedi’s value comes despite efforts by the Bank of Ghana to stabilize the currency. Earlier this year, the central bank raised interest rates and implemented other measures to reduce inflation and curb demand for foreign exchange. However, these measures have not been sufficient to halt the cedi’s depreciation. Analysts say several factors are contributing to the dollar’s resurgence. First, the global economic outlook remains uncertain, with concerns about the potential for a recession in the United States and Europe. This has led investors to seek safe-haven assets such as the US dollar. Second, Ghana’s current account deficit remains a significant drag on the cedi. The country imports more goods and services than it exports, which creates demand for foreign currency. Third, Ghana’s fiscal deficit is also a concern, as it puts upward pressure on interest rates and makes it more difficult for the government to accumulate foreign reserves. The depreciation of the cedi is having a negative impact on the Ghanaian economy. It makes it more expensive for businesses to import goods, which can lead to higher inflation. It also makes it more difficult for Ghana to repay its external debts. The Bank of Ghana is expected to continue to monitor the situation closely and take further action if necessary to stabilize the cedi. However, analysts say it is unlikely that the cedi will regain its previous value in the near term.Cedi Loses Gains Despite Bank of Ghana Measures

Cedi Loses Gains Despite Bank of Ghana Measures

The Ghanaian cedi has resumed its depreciation against the US dollar, despite efforts by the Bank of Ghana (BoG) to curtail its slide. Recently, the dollar had lost ground to the cedi after the BoG implemented strict measures, including a crackdown on illegal traders. This led to market inactivity and caused the dollar rate to drop for several days. However, as predicted by market observers, the unavailability of dollars halted the cedi’s gains on Friday, June 7. On the following Monday, the dollar rebounded to its June 3 levels, with opening bids around GH¢15.08 and higher bids of GH¢15.20. Market analysts attribute the reversal to reduced activity in the interbank market on June 7, primarily due to an inadequate supply of dollars. They warn that if the supply does not improve by Tuesday, June 11, the rapid increase in the dollar rate experienced in May could resume. The BoG has acknowledged having sufficient dollar reserves to meet demand but has faced challenges in injecting adequate foreign currency into the market. Moreover, the Central Bank’s reserves are only sufficient to cover three months of the country’s imports, making it difficult for the BoG to flood the foreign exchange market with US currency. The next significant expected inflow is the third batch of $360 million from the IMF, scheduled for the end of June. The period leading up to that will be critical as the fate of the cedi remains uncertain.The Ghanaian cedi has resumed its depreciation against the US dollar after a brief respite. The cedi had gained some ground against the dollar in recent weeks, but the gains have been reversed in the past few days. On Monday, the cedi traded at 10.50 to the dollar, down from 10.30 the previous week. The depreciation of the cedi is being driven by a number of factors, including the rising global demand for dollars, the slowdown in Ghana’s economy, and the country’s high import bill. The Bank of Ghana has taken a number of measures to try and stem the depreciation of the cedi, including raising interest rates and increasing the supply of dollars to the market. However, these measures have not been effective in reversing the trend. The depreciation of the cedi is putting pressure on businesses and consumers in Ghana. Businesses are having to pay more for imported goods, and consumers are seeing the prices of goods and services rise. The government is also concerned about the depreciation of the cedi, as it is making it more expensive to service the country’s foreign debt. The Bank of Ghana is expected to continue to take steps to try and stabilize the cedi. However, it is unclear whether these measures will be effective in the long term.