Recent depreciation of the cedi is temporary – BoG

The recent blip in the foreign exchange market that saw a slight depreciation of the cedi against the dollar is short-term and a reflection of a spill over from external developments, an official of the Bank of Ghana has said.

Mr Steve Opata, the Director, Financial Markets Department, told a section of the media that changes in global financing conditions, due to rising oil prices and hikes in US interest rates, were impacting frontier market economies in Sub-Saharan Africa. 

However, he said, Ghana is in a strong position to overcome the exchange rate volatility due to excellent economic fundamentals and a good external payments position.  

“We want to assure the market that we have adequate reserves and the fundamentals do not support the slippages we have seen and we expect it to correct itself,” he said. 

From the week beginning May 21, the local currency had been under pressure, particularly the cedi against the dollar.

The cedi opened on the interbank market on Tuesday at 4.43 cedis to the dollar while the Forex Bureaux are quoting it at 4.65 cedis to the dollar.

“In the case of Ghana, we strongly believe that staying on track with government’s fiscal consolidation plan, the strong trade surplus, narrowing current account balances, significant build-up in international reserves (now standing at US$8.1 billion and 4.4 months of imports cover), and declining inflation rates, should moderate this impact,” he said.

On fears of some market participants that MTN’s payments to external shareholders from the initial public offering could impact negatively on the exchange rate, Mr Opata said the BoG had received assurances from management of MTN that there were no immediate plans to externalise the payments. 

“The BoG is engaging the management of MTN Ghana to ensure that any Foreign exchange outflows arising from this transaction is done in a phased and orderly manner,” he said, adding that even if there are some externalisations we will work with them so that it is done in a gradual manner so as not to shock the system.

“I don’t think market participants should be too concerned that this will dislocate the market because it would be done in an orderly fashion,” Mr Opata added.

He said the BoG would continue to assess the market and support with liquidity when necessary, adding that, the global and domestic developments do not yet pose a threat to inflation in Ghana in the near term, and that, the BoG is monitoring the situation to take appropriate policy actions as required.