The outlook of the Ghana cedi is still positive despite the recent pressures due to repatriation of dividends by multinational companies.
The Ghanaian currency has appreciated against the dollar marginally since the beginning of the year.
Analysts believe there is little to worry about due to the various interventions implemented by the Bank of Ghana as well as the strong reserve position of the country.
Senior Economic Analyst at Databank Research, Courage Martey tells Joy Business the fundamentals are still strong to preserve stability of the local currency.
“We’ve seen a slight depreciation of 0.3% for the local currency against the US dollar in the last few days, and the Bank of Ghana indicated that they have initiated some meetings with these multinationals to better organize the flow [US dollars]. So this gives confidence that over the course of this year, the pace of depreciation shouldn’t worsen and it will still be in line with fundamentals”.
Furthermore, he said “the view of the Ghana cedi against the US dollar today (year-to-date) will still show a slight net gain against the dollar today and that’s about 0.2% using the Bank of Ghana’s reference rate as at the close of last week’s trading. And this position still makes it some worth better than the same period last year where it depreciated by some 1.6% against the dollar.
Mr. Martey said the authorities especially the Bank of Ghana are doing a lot to ensure that the currency [cedi] is in line with the fundamentals and not recording fast depreciation to distort the market sentiment, particularly the forward market interventions.
“Generally, you look at our net expected outflows as a country against our net expected inflows as a country and you realize that we have a net outflow as a country and that translates into a modest deficit on the current account balance; and once we have this deficit, the expectation is that there’ll still be some depreciation. But it’ll be a depreciation that is in line with the fundamentals”, he added.
He further said “the behavior of our current account balance differ essentially and since the current account deficit is not expected to be that large, we don’t expect a large depreciation or a fast pace of depreciation of the local currency against the US dollar. And so generally our view is still positive despite the recent pressure or softening on the local currency.”
You will need about GH¢5.81 to buy a dollar on the interbank forex market.
Cedi appreciates 0.4% to dollar in 5-months – BoG
The Ghana cedi appreciated by 0.4% to the dollar in the first five months of this year, data from the Bank of Ghana revealed
It also increased in value to the euro by 1.0%, but depreciated by -3.3% to the British pound. But the mode of exchange for Ghana is the dollar.
The cedi’s strong performance against the dollar was attributed to the Bank of Ghana’s Forex Forward Auction which ensures there is adequate dollars in circulation, a diversified export commodities and reduce imports.
Source: Joy Business