The Bank of Ghana has been urged in the short term to inject more dollars into the economy to address the depreciating cedi.
According to Finance Lecturer at the University of Ghana Business School, Dr. Benjamin Amoah, that is the immediate solution to the current pressure on the cedi.
With just two months into the year, the cedi has lost more than 7% in value against the dollar and is the worst of African currencies with “Worst Sport Returns” by Bloomberg.
Dr. Amoah who expressed shocked at the performance of the cedi said the structure of the economy must be critically looked at, whilst fiscal managers of the economy must live up to expectation.
“I must say that the cedi’s performance in the first two months has been a bit of a shock to us although we anticipated that 2022 will be a difficult year for the Ghana cedi. We never thought that it will be quick.”
“What is happening to the Ghana cedi is because of the nature of the current condition of the economy. If you had observed from last year, especially last quarter of last year, the Governor of the Bank of Ghana [Dr. Ernest Addison] made some statements at the Annual Banking Dinner, and if you read and analyse his report, the statement that he made in there shows that the economy was really really having some difficulties. So that is one”, the Executive Director of the Center for Economics, Finance and Inequality Studies explained.
“Two is also the fact that our managers of the economy have also not been able to help us push across the confidence of the Ghana cedi. I’m saying this with reference to the statement made by the Minister of Finance [Ken Ofori-Atta] in Koforidua concerning the need that we have to pass the E-Levy if not the economy will be in shambles. He was being truthfully, but then if you want to rally around confidence you have to preach some level of hope to get investors to buy into your economy. Nonetheless, the fundamentals of the economy speak volume of what we finally find ourselves; inflation is on the high, interest rates are on the high”, he added.
Furthermore, Dr. Amoah said “in the short term, there is a speculative attack on the currency and so the only way to deal with the short term is to again call on the Bank of Ghana to do the injection of dollars into the system [circulation]. So that in the short term, the excessive pressure on the currency can be controlled”.
“Then to the medium to long term, we can look at what we can do in terms of some of the structural things we need to do. If we are importing a lot, we need to look at that importation, so we can reduce the pressure on our currency”, he stressed.
Cedi now worst among Africa’s top currencies; depreciates 7.6% to dollar
The Ghana cedi over took the Zambian kwach as the worst-performing currency among Africa’s top currencies just two months into 2022.
This is because it has depreciated by about 7.6% to the dollar from January 1, to February 25, 2022.
Bloomberg also classified the cedi as the worst of African currencies with the “Worst Spot Returns”.
It pegged the depreciation of the cedi to the dollar at 8.86% between January 1, 2022 and February 25, 2022.