The cedi continues to depreciate despite recent measures and warnings from the Bank of Ghana (BoG).
At a press conference on Monday, May 27, Central Bank Governor Dr. Ernest Addison outlined various strategies aimed at stabilising the currency. However, the cedi has yet to respond positively.
On the day of the press conference, the dollar opened trading on the interbank market at GH¢14.75 to GH¢14.85. By Wednesday, May 29, the dollar had risen from GH¢14.84 to GH¢14.98.
While the Ghana Association of Forex Bureaux has kept its base rates at GH¢14.80 for buying and GH¢15.20 for selling, the dollar is selling for nearly GH¢15.90 at some Forex bureaux.
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Governor Addison pointed to the Forex Bureaux as a significant factor in the cedi’s rapid depreciation, stating, “The exchange rate has recently come under some pressure, especially in the Forex Bureaux market.”
To address the issue, the BoG announced a series of measures on Monday. These include intensifying efforts to curb illegal activities in the forex market, enforcing regulatory compliance among banks and forex bureaux, as well as cracking down on black market operators.
The Central Bank also warned Forex Bureaux against advertising rates outside their premises and on social media. Additionally, a task force has been established to monitor compliance among Forex Bureaux.
Dr. Addison assured that the Central Bank has sufficient reserves to meet demand, having added over US$600 million to reserves in the first five months of the year. He also mentioned that the BoG had taken steps to address the foreign exchange needs of some corporate institutions, reducing “the pipeline demand” from commercial banks.
Furthermore, the Central Bank is working with the Ghana Association of Banks to streamline documentation requirements for foreign payments, aiming to minimize the incentives to use informal markets.
Despite these assurances, market analysts The Accra Times spoke with on Wednesday, May 29, indicated that insufficient supply of the dollar is pushing its price up.
“USD liquidity continues to worsen as even before the market opened, we’re seeing various bank dealers bid firmly for the greenback. Bids for the greenbacks have marginally priced up from yesterday’s trading,” one analyst noted.
There are also concerns that traders are becoming more cautious due to fears of stringent enforcement actions by the Central Bank against non-compliant forex market operators.
As of May 22, the cedi had depreciated by 14.6% according to BoG, but on the retail market, it has depreciated by over 19%.
Dr. Addison attributed the recent exchange rate pressures to several factors, including “a weakening of the current account surplus due to higher import demand and lower export revenue, particularly a sharp decline in cocoa export earnings.”
He also noted that robust public spending on Independent Power Producer (IPP) arrears and capital expenditure has contributed to the pressure on the dollar.
Other factors include uncertainty surrounding debt restructuring negotiations with external creditors and increased demand from importers turning to informal markets, exacerbating speculative demand for foreign exchange.
