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BoG give reasons for cedi’s stability against US dollar

The Bank of Ghana (BoG) has credited fresh monetary policies implemented by the government’s central bank for the cedi’s recent gains.

Stephen Opata, the Bank of Ghana’s Director of Financial Markets, claims that the cedi’s performance is related to the BoG’s choice to limit foreign exchange support to a few vital commodities including petroleum products and medical and pharmaceutical items.

He continued by saying that the judicious management of liquidity in the financial system is also responsible for the cedi’s gains.

As a result of recent rises in the policy rate to 27%, we have also observed that monetary policy has been tightened. This has also helped the cedi’s strong run, he said.

Despite current worries with the proposed debt exchange scheme, he stated that “the continual climb in the policy rate would also ensure that excess cedis cannot be used to acquire government bonds and other instruments.”

According to Mr. Opata, these might be some of the main causes for the cedi’s stability against the dollar over the past three weeks.

Background

When traded on the currency market, the cedi has made some steady gains versus the US dollar.

Based on the average prices issued by some of the country’s commercial banks, the local currency has decreased from 15 to about 10 to a dollar since November 2022.

In the meantime, several financial commentators have connected the rapid recovery of the cedi to the government’s personnel agreement deal with the IMF.

In a previous weekly report, Databank Financial Service made the forecast that the cedi’s recent upward trend would continue.

Some observers have noted that the US Federal Reserve’s indications to start easing up on rate increases have also helped to the stability of the cedi.

Cedi’s performance

Between December 5 and December 9, 2022, the cedi increased in value relative to the dollar by more than 10%, according to Bloomberg.

Due to this, the cedi outperformed 150 other currencies tracked by Bloomberg News in terms of growth.

On December 12, 2022, the Ghana cedi increased by roughly 10% in comparison to the other top four currencies worldwide, according to Bloomberg’s tracker.

Sustaining the cedi performance

According to Mr. Opata, maintaining the cedi’s performance would not solely depend on the availability of the currency.

The issue will also depend on the ongoing government-led economic reforms that are being implemented.

He claimed that the staff’s agreement with the IMF is a significant move that will aid in cedi stabilization.

Dr. Priscilla Twumasi Bafour, an economist, has stated that the BoG needs to work hard to cope with the activities of speculators.

 

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