AGI warns over cedi's performance

The Association of Ghana Industries (AGI) has cautioned the government to keep a watch on the cedi, as it battles to fix the power crisis that is almost grinding the manufacturing sector to a halt.

AGI President, Mr James Asare Adjei, is unenthused about the flagging cedi, which has so far dipped seven per cent against the major foreign currencies since January this year.

“The power situation has overshadowed our concerns for the cedi, which is beginning to be a source of worry for our members,” said the AGI boss.

Last year, the cedi cumulatively depreciated by 31.2 per cent compared to 14.5 per cent in 2013, which forced the Bank of Ghana (BoG) to introduce some forex measures to contain the fall but were later scrapped after public criticism.

“It’s too early in the year for us to start seeing this level of depreciation and we, therefore, call on the BoG to put all the necessary measures in place to avoid the recurrence of last year’s slide”,  Mr Asare Adjei said in an interview with the Graphic Business. 

Currently, the average rates on the forex market against the dollar stands at GH¢3.50,  representing a 0.48 per cent slip of the cedi.

Analysts forecast depreciation at a significantly higher pace in the first half of the year before the first train the long-awaited US$940 million IMF inflows kick in.

The inflows are expected to shore up an economy hit by falling gold and cocoa prices, rising debt, growing trade and fiscal imbalances and a depreciating currency.

Cedi or power For many, even before the government attended to the country’s fiscal and foreign exchange slippages, it had been bogged down by an energy crisis that had deteriorated in recent times, hitting businesses hard. The government blames the situation on low water levels in the Akosombo Dam and the lack of gas to power the country's thermal plants.

But the concern of the AGI boss is that beyond the cedi’s fall, industries were laying off workers, domestic power consumers were complaining of destruction of household appliances, while cold store operators were grouchy over their rotten fish and meat products due to persistent erratic power supply.

Already, Standard Chartered Bank, Head of Africa Research, Ms Razia Khan, is predicting a GH¢4.20 rate depreciation against the U.S dollar by the end of the year. 

The prediction was contained in a report issued by the research wing of the bank responsible for Africa. 

Ms Khan has maintained that the GH¢4.20 could be revised when the IMF inflows kick in. 

The report noted that although that was an end-of-year target by the bank, it also expected some marginal pressure on the cedi in the early months of this year because of moves by some companies to restock, mainly by importation.

But Databank’s analyst, Mr Courage Kingsley Martey, pegs the cedi’s end of year depreciation forecast at a conservative GH¢3.40 (with GH¢0.10 margin of error) to the dollar.

“Our forecast is critically based on the expectation of a three-year extended credit facility IMF programme which would provide balance of payments support, as well as restore donor and investor confidence in the economy”, Mr Kingsley Martey said in an interview. GB