The cedi is on the brink of a significant rebound after a dismal performance during the first half of 2015, an economic think-tank and pressure group, Citizens for Good Corporate Governance has predicted
In a statement issued in Accra yesterday, the group predicted that the cedi would recover significant ground against the US dollar and other major international trading currencies during the second half of the year due to the large quantum of foreign exchange inflows being expected over the coming months.
The inflows, according to the statement, would reverse the current shortfall in supply of forex on the local financial markets.
Some US$4 billion in inflows are being expected over the next few months from diverse sources including this year’s international syndicated loan for cocoa purchases of US$1.8 billion; the proceeds of an imminent US$1.5 billion Eurobond issue; the first tranche of recently approved World Bank financing to the tune of US$550 million; development partner bilateral assistance of some US$500 million; and two tranches of the balance of payments support from the International Monetary Fund cumulatively amounting to over US$200 million.
“Indeed, in anticipation of these inflows and in response to the Bank of Ghana’s on-going intervention in the local forex market through increased supply of forex, the cedi has already begun appreciating and by the beginning of this week the US dollar was trading for about GHc3.8, up from a trough of GH¢4.5 a couple of weeks ago,” the statement said.
The think-tank said its quantitative economic modeling suggested that the cedi could appreciate to GHc 3.2 before the end of the third quarter of this year.
It pointed out that while the central bank and the government itself could escape blame for the cedi’s travails, it was overly simplistic to hold those institutions alone responsible for the problem and therefore expect them alone to provide the solution.
“To rescue the cedi it behooves on everyone resident in Ghana to cut back their consumption of imported goods relative to available locally produced substitutes,” it said.
The think-tank also identified currency speculators who purchase forex as an investment and seek to make profits from the cedi’s subsequent depreciation as major culprits in the cedi’s fall and warned that just like what happened during the third quarter of last year, the imminently expected forex inflows and consequent appreciation of the cedi stands to wipe away the profits they have made this year unless they offload their forex holdings and return to the cedi.
It noted that monetary policy tightens and forex market intervention as currently being successfully carried out by the central bank, as well as capital account inflows of forex from abroad were only a temporary panacea.
“Therefore unless the fundamental imbalance between Ghana’s forex earnings from exports and its forex expenditure on imports is addressed, the cedi would eventually resume its depreciation,” it said.