The Ghanaian cedi experienced another blow as it crossed the GH¢15 mark against the US
dollar, less than three weeks after breaching the GH¢14 milestone. Throughout the last 23 trading sessions, the local currency has witnessed a consistent consistent decline, marking its most significant losing streak since 1994.
Analysts attribute this depreciation to a combination of factors, including heightened corporate demand for the dollar and a reduction in the supply of US currency. Bloomberg reports a decrease in dollar supply, citing a significant drop in cocoa earnings.
Adverse weather conditions, disease outbreaks, and shortages of fertilisers have contributed to a nearly one-third decrease in cocoa exports, totalling $508 million in the first two months of the year.
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Conversely, currency experts interviewed by The Accra Times highlight increased demand for the dollar from corporate entities fulfilling obligations such as repatriating profits, paying dividends to foreign shareholders, and servicing external debts.
As of Monday, May 13, 2024, the dollar was advertised for sale at GH¢14.60 on the website of the Ghana Forex Bureaux Association. However, by 4:00 PM, the rate had surged to GH¢14.80, with many forex bureaux selling the dollar for GH¢15.
Despite assurances from the Central Bank Governor just days prior that measures were being taken to curb the cedi’s depreciation, the dollar continued its ascent. The Governor, speaking at the launch of the Commercial Paper Market, acknowledged recent market pressures but assured that the bank had sufficient reserves to address them.
Despite interventions by the Bank of Ghana, analysts foresee the cedi’s depreciation persisting until the next tranche of funds from the International Monetary Fund is received. Additionally, concerns loom over the potential impact of upcoming election activities, which typically involve significant imports of campaign materials and could further strain the cedi’s value in the latter half of the year.
Moreover, there are apprehensions that the cedi’s depreciation may hinder efforts to substantially reduce the monetary policy rate, a proposition advocated by prominent economists in recent days. The Monetary Policy Committee is scheduled to convene between May 22 and 24, 2024, to deliberate on its policy rate, which influences loan interest rates.
