The perennial sharp depreciation of the local currency at the beginning of every year is here with us again as the Ghana cedi crossed the GH¢4 mark on Monday January 18, 2016, indicating the existence of the volatility of the local currency despite the International Monetary Fund bailout programme.
Most banks sold the local currency for GH¢4.01 to the US dollar on January 18, 2016.
However, on the Bank of Ghana (BoG) website, the local currency was quoted at GH¢3.81 to one American dollar.
Some currency dealers with commercial banks who spoke to Business Finder on condition of anonymity noted that the fundamentals of the economy were still weak thus fuelling the volatility of the cedi. Already, some analysts have predicted that the real test of the strength of the currency will be witnessed within the first quarter of this year.
Economic Analyst and CEO of asset management firm, Investcorp, Sampson Akligoh told this paper that the Ghanaian economy was not too well hence the sharp depreciation of the local currency.
“Maybe the expected Eurobond will reduce the rapid depreciation of the cedi during this time of the year marginally. However, the sad thing is that we have to pay a higher yield to attract investors’, he explained.
Ecobank Research also says accelerating inflation (17.7 percent in December 2015), lower commodity prices and revenue as well as higher spending in the run up to November 2016 elections all raise concerns.
The instability of the cedi sometimes makes it difficult for analysts to make clear projection.
In June 2015, the cedi crossed the GH¢4 mark to trade at GH¢4.20 before a radical decision by the Bank of Ghana to inject $100 million into the forex market daily to support the demand for the green currency reversed the decision. An urgent intervention by the International Monetary Fund (IMF) also helped to curtail the pressure on it.
The Bretton Woods institution had injected part of the US$914 million support into the Ghanaian economy to shore up the balance of payment and current account situation.
The cedi lost about 60 pesewas in value to the US dollar last year, making it one of the underperforming currencies in Africa.
It started the year at GH¢ 3.2001 to the American currency but ended the year at about GH¢3.80, a 15.0 percent depreciation rate.
The local currency however did better than 9 out of 25 currencies captured by Ecobank Research in 2015. They included the South African rand, Angola kwanza, Zambia kwacha, Namibia dollar and Tanzania schilling.
The Gambian Dalasi however remained the best performing currency among the 25 Sub Saharan African currencies last year, appreciating by 8.2 percent against the US dollar.
Neighboring Nigeria’s Naira however depreciated by 7.2 percent to the US dollar, the same as at October 2015 while the Ivory Coast CFA also depreciated by 11.4 percent to the dollar.
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