EVEN as government awaits proceeds from its recent over-subscribed $3 billion Eurobond, in addition to other interventions that will inject some foreign exchange onto the market the cedi has already started making some gains on the forex market.
The local currency has since March 13, 2019 regained some 5.86 per cent value against the US dollar to trade at GH₵5.2575 to US$1 as of 16:00 local time Wednesday from a record high of GH₵5.5850, according to the Bloomberg Terminal.
However, the exchange rate on the interbank market show no appreciation of the cedi against the dollar but the local currency has remained static trading at GH₵5.24 to a dollar since March 12, 2019.
Analysts and currency dealers are optimistic the local currency will continue its upward surge in the short term before stabilising.
“The market has picked up news of impending dollar inflows from the Eurobond proceeds of about US$3 billion, the COCOBOD loan facility of about US$900 million and the $750 million bridge financing intended to cover the government’s short-term expenses,” Senior Economic Analyst with Databank Group, Courage Martey said.
The analyst indicated that this has resulted in a lot of speculative buyers offloading “their dollars for profit-taking and this is causing appreciation of the cedi.”
Cedi to continue rally
“I think we’ll see some more gains for the cedi in the coming days until the speculative factors are reduced to the barest minimum, beyond which we should start to see stability in the exchange rate. So, I am fully convinced of a near term stability after the excess losses have been fully corrected from the exchange rate,” he added.
Capital flights, cause of depreciation
Economic Professor, Dr Eric Osei-Asibey blamed the cedi’s depreciation on seasonal capital flights or the repatriation of profits by multinational firms at the beginning of the year and the over concentration of the debt structure on foreign investors, making the currency sensitive to global shocks.
He said the short-run movement of the currency rate sometimes has nothing to do with the fundamentals because the fundamentals are strong.
“If the fundamentals are anything to go by, I think that we shouldn’t be seeing the trend that we are seeing because the market fundamentals appear quite strongly, we are seeing inflation coming down, we are seeing interest rates trending downwards, we are seeing fiscal deficit narrowing significantly, we are seeing trade surplus,”
He called for a targeted monetary policy approach to arrest the short movement of the currency at the beginning of the year which has become seasonal annually.
In the long term, he called for more government support to the local private sector to boost production and exports, applauding the one district one factor deliberate policy as a timely one.
The Ghana cedi opened the year trading at GH₵4.9175 to a dollar but took a nose dive from the second week of February to record an alarming 13.57 per cent depreciation by mid-March.
The local currency ended the year 2018 with an annualised depreciation of about 8.8 percent to the US dollar. This is against a depreciation of 4.45 percent in 2017 and about 9.2 percent in 2016, all against the greenback.
However, the Ghana cedi began a comeback following the announcement by Finance Minister, Mr Ken Ofori-Atta, that a total of $4.6 billion would be injected into the system before the second quarter of this year.
The breakdown includes proceeds from the $3Eurobond, about $900 million funding for the COCOBOD and an additional $750 million bridge financing.
Source: The Finder