Government of Ghana has hinted that an amount of USD 2 billion to be pumped into the economy in what it says will “rescue” the domestic currency.
This is part of the “far-reaching” measures adopted by the government to mitigate the economic hardship.
— Ghana Presidency (@GhanaPresidency) March 23, 2022
In earlier reports, the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has calmed nerves over the current rapid depreciation of the cedi, saying, the bank is implementing interventions that will stabilise the local currency against its major trading currencies in the shortest possible time.
His comments come on the back of concerns over the cedi’s sharp loss of value within the past two months, as daily interbank FX rates (day’s weighted average) published by the Bank of Ghana, shows that, as of 15 March 2022, the cedi has plunged 17.1% against the US dollar, selling at GHC7.03 to a dollar, making it the worst performance of the currency in the last seven years.
The situation is even worse when it is analysed from the forex market, as banks and forex bureaus are trading the cedi at GHC7.50 to a dollar, at least, – a situation some market watchers are projecting may hit GHC8 cedis by end of the year.
But despite the poor performance of the cedi, and what analysts are projecting, Dr. Addison said, the local currency will soon start appreciating given the interventions from government and the central bank.
“As you are aware, the cedi came under pressure in the early part of February. And the reasons include the fact that we have lost access to the capital market and therefore we were not going to issue a bond this year which has negative implications for the availability of foreign exchange. The government has announced its intentions to raise US$2 billion from some syndicated arrangements with banks. If that goes through, that should help improve the supply of foreign exchange to the economy as a whole and should impact positively on the cedi.
In terms of what the Bank of Ghana has been doing, we have the fortnightly foreign exchange auctions where we make foreign exchange available to the system and in the last few weeks, we have been making special allocations to the [Oil Marketing Companies] OMCs and the energy companies as well as the cement producing companies. I can tell you that, as of last week, we have completely cleared the pipeline demand for foreign exchange from these OMCs,” he said at an engagement with the media in Accra after announcing the policy rate.
He further stated that the central bank has put in place measures to increase forex supply on the market as part of short-term measures to address the situation, adding that, medium to long term initiatives are also in place to stem the local currency.