The Ghana cedi has been performing very abysmally on the international market since the beginning of the year. An issue that is of great concern to all Ghanaians because of the negative effects it has on the economy; inflation and high cost of living. Data from Bloomberg indicates that the cedi has depreciated by 40.05% to the US Dollar. The cedi is now labelled as the second-worst performing currency in the world and the worst of 30 high-performing currencies in Africa.
The cedi lost nearly 21% in value to the US dollar, Euro, and pounds sterling in July, August, and September of this year. The accounting factors for the cedi’s failure on the international market are high debts and low investor confidence. This has made it difficult for the country to access the international capital market for loans. As a result, Ghana seeks about $3 billion bailout from the International Monetary Fund (IMF) to fund its economic programmes.
The Bank of Ghana has taken the following steps to stabilize the cedi when the IMF deal goes through:
- The recently granted USD 750,000,000 Afriexim credit facility by Parliament will strengthen Ghana’s foreign exchange situation.
- More foreign currency will be provided to help offset the cedi depreciation through the Cocoa Loan Facility, which is anticipated to yield in the fourth quarter of the year.
- The Gold Purchase Program will boost reserves of foreign currency.
- A special foreign exchange auction to aid in the acquisition of petroleum supplies for the Bulk Distribution Companies (BDCs).
- The Bank of Ghana is collaborating with mining firms to give BOG the chance to purchase gold as soon as it becomes available.
- The Central is providing foreign currency liquidity to the banking sector to help satisfy the demand for external payments.
- When the IMF program is complete, it will significantly contribute to regaining investor confidence in the economy and stimulating portfolio flows. The number of foreign exchange reserves held by the Central Bank will be significantly boosted by these actions.
The Bank of Ghana believes that these interventions will help restore the cedi from its deteriorating state. Are these programs adequate and sustainable enough to serve the country for the long term or will we have to run to the IMF again seeking a bailout in the near future?
Priscilla Fumadorh
Priscilla is an entrepreneur and a creative communicator who loves to communicate through writing. She is passionate about national economic issues and does not miss a chance to offer her opinions on them for the good of the country.
We do hope we do not run to the Imf in the near future