The last week of May has commenced with the US dollar being sold at GH¢15.75 cedis at various forex bureaux in Accra, up from GH¢15.30 at the beginning of last week.
This increase reflects a significant depreciation of the cedi, which has fallen by over 19% on the retail market due to heightened demand for the dollar and an inadequate supply of the US currency.
Several factors have been attributed to the declining value of the cedi. These include increased demand from corporate institutions and insufficient inflows from Ghana’s key exports, particularly cocoa. Finance Minister Dr. Mohammed Adam also pointed to a strong dollar, an increase in cedis in circulation due to payments to contractors and independent power producers (IPPs), and speculative activities as contributing reasons for the cedi’s depreciation.
During a press briefing on Friday, May 24, Dr. Adam outlined several measures aimed at halting the cedi’s depreciation. These measures included curbing government spending while enhancing revenue mobilization, intensifying the Gold-for-Oil programme, and implementing appropriate forex interventions through the Central Bank. Additionally, the government is expecting around $2.32 billion from various sources between now and the end of the year.
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Despite these announcements, the cedi continued to lose value over the weekend. On Monday, May 27, the Governor of the Bank of Ghana, Dr. Ernest Addison, is scheduled to brief the media on the economy’s status and the Monetary Policy Committee’s (MPC) decision regarding the policy rate after their three-day meeting.
It is anticipated that the Governor will detail steps being taken to address the cedi’s depreciation. A lack of substantial interventions may further increase the dollar’s price. The declining value of the cedi also complicates efforts to lower the policy rate from its current 29%, a reduction advocated by some prominent economists.
Meanwhile, the latest economic and financial data from the Central Bank indicate an improvement in Ghana’s Gross International Reserves, which increased from $5.99 billion in March 2024 to $6.59 billion in April 2024. This improvement means the reserves, previously covering 2.7 months of imports, now cover three months, meeting the minimum requirement under the International Monetary Fund (IMF) programme. This cushion allows the Central Bank to periodically inject dollars into the forex market, potentially slowing the cedi’s depreciation.
