Cedi depreciation: – Standard Bank predicts slow pace of fall

The cedi is to depreciate at a much slower pace against the US dollar in the coming months, the Standard Bank has predicted.


In its August 2018 edition of the African Local Markets Monthly (ALMM) report, the bank forecast that one dollar would linger below GH¢4.90.


The speed of the fall would be slowest in recent years, should the prediction come to pass.


Currently, one dollar goes for about GH¢4.9 on the interbank market.


“On a multi-month basis, it still looks likely that the pair will head higher. But it is likely to be at a far slower pace than we have seen in recent years.

We still believe that the pace of depreciation of the Ghana cedi will be considerably lower than the average 13.0 per cent annualised pace of depreciation over the last 10 years”, the report said.

The bank attributed its prediction to the Central Bank’s readiness to provide the currency market with forex rates lower than prevailing rates.


It said a strengthened balance of payment (BOP) on a durable basis, largely supported by oil exports and government’s issuance of Eurobonds, was also a factor.


“The Bank of Ghana (BoG) has shown itself to be willing to supply forex to the market whenever there are indications of large outflows. The FX sales are not intended to prevent the Ghana cedi from depreciating per se.


“But it is notable that the BoG’s FX sales are at rates considerably below prevailing interbank rates. Of course, this is not something new. The BoG typically sells USD at rates lower than the prevailing market rates,” the report stated.


Commenting on the report, Phumelele Mbiyo, Head of Africa Research at Standard Bank said the bank’s view was hinged on an assessment that the country’s BOP had been strengthened on a durable basis.


“Oil exports have helped to turn the trade balance to surplus, something that is likely to last. In the first five months of the year, total exports amounted to roughly USD1.5 billion, giving rise to a trade surplus of USD261.1 million”, he said.


  • He posited that forex reserves remained relatively robust of which it is expected to persist over the remainder of this year and for much of next year.
  • “Gross forex reserves amounted to USD5.9 billion in May, up from USD5.0 billion in April. Also, thanks to the government’s issuance of Eurobonds, forex reserves rose to USD7.3 billion at the end of June, covering 3.9m of imports according to the BoG’s calculations,” Mr Mbiyo said.

The report also noted that anecdotal evidence suggests that there had been a fair amount of outflows from the market in the last three months or so “While the magnitude is uncertain, the outflows have prompted the BoG to sell some forex. As of the end of May, foreigners held GH¢28.16billion of local debt out of a total of GH¢72.4billion.”

The African Local Markets Monthly is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana and focuses on the economic and financial outlook of African countries.


The report also reviews current economic situations and makes short to medium-term predictions about the economies of African countries.

 By Times Reporter

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