The Ghanaian cedi has depreciated by over 18.07% against the dollar on the retail market since the beginning of the year, significantly impacting the prices of goods and services. From early May to the close of trading yesterday, the cedi lost 5.02% of its value, based on average opening and closing rates.
As of Wednesday noon, May 22, the Ghana Forex Bureau Association quoted the base rate for the dollar at GH¢15.15, with some forex bureaux selling as high as GH¢15.30. On the interbank market, the dollar started the day’s trading at around GH¢14.70.
At the start of the year, the US dollar was valued at approximately GH¢12.20 on the forex bureau and GH¢11.88 on the interbank market. By early February, the interbank rate moved to about GH¢12.50, depreciating further to around GH¢12.93 in early March, GH¢13.65 in early April, and reaching its current rate.
The cedi’s depreciation is attributed to an inadequate supply of dollars to meet demand. Bloomberg reports that the decline in dollar supply is due to a significant drop in cocoa earnings, with exports falling nearly a third to $508 million in the first two months of the year due to adverse weather, disease, and fertilizer shortages.
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Conversely, demand for the US currency has risen due to corporate requirements such as repatriating profits, paying dividends to foreign shareholders, and servicing external loans.
The Central Bank attempted to curb the cedi’s depreciation by injecting nearly $100 million into the interbank market between May 13 and 15. This intervention only temporarily slowed the depreciation. The Bank of Ghana (BoG) is limited in its ability to inject more dollars due to reserves amounting to about 2.8 months of import cover as of February, falling short of the IMF’s minimum requirement of 3 months.
Analysts are concerned that further depreciation could trigger a rush for the dollar as a store of value, potentially leading the cedi into a free fall. Experts are keenly awaiting the outcomes of the Central Bank’s ongoing Monetary Policy Committee meeting for measures to stabilize the cedi.
