The cedi’s current poor performance against the dollar is expected to run into the second quarter of 2017.
This is the prediction coming in from some currency analysts.
Almost three months into 2017 it appears the perennial challenges that the cedi faces in most years have commenced in earnest.The development has led to warnings from importers over the likely increase in the prices of imported goods in the coming days if the development does not improve.
Performance of cedi so far in 2017
The cedi commenced the year at 4 cedis 20 pesewas on the interbank foreign exchange market.
Figures available to Citi Business News from the Bank of Ghana as well as Forex bureaus across the country show that the cedi has depreciated by about 5.4 percent between January and February of this year alone on the interbank forex exchange market and as much as 6.72 percent in the same period across forex bureaus in the country.
In the same period a year ago the cedi performed better in forex bureaus across the country depreciating by only 2.5 percent.
Reasons for cedi’s poor performance
General Manager of Treasury at HFC Bank Mr Joseph Nketsia told Citi Business News low supply as well as hoarding of dollars among others have led to the development.
”The supply of the foreign currencies on the market is not matching up with demands. This is a normal trend at the beginning of the year, we get importers who imported goods for the Christmas and either deferred letters of credit or on collection bases, this is the time that they would have to pay their suppliers.
The second part also, people who are restocking their shops, normally during the Christmas when they sell, they don’t restock so they keep the cash and then as we enter the new year, they start restocking”.
According to projections the cedi’s poor performance would continue into the end of March 2017.
”But I believe strongly that as we enter the second quarter of the year we are likely to see the cedi stabilize, depreciation will continue maybe through the month of March but as we enter April, we are likely to see a stabilization. The interbank rate should be between 4.55 cedis and 4.6 cedis at the end of March, while the forex bureau market will be a bit difficult to predict but normally we should see just about 4.65 to 4.7 on the forex bureau market”. He said.
BoG steps in to save cedi
As part of moves to deal with the cedi’s woes the Bank of Ghana this year alone auctioned about 40 dollars in January, 2017 and an extra 20 million dollars in February from cash from inflows from the cocoa syndicated loan.
Industry players believe delay in cash inflows from the International Monetary Fund program as well petroleum receipts following the purchase of crude and gas to power the country’s power plants has also contributed to the cedi’s woes.
Meanwhile demand outweighing supply is also having an impact on forex bureau operators in the country especially in Accra.
A forex bureau owner told Citi Business News he has had to reduce his weekly supplies by over 70 percent because of current supplies which are too low to meet demand.
” Before within a week you can get about ten thousand dollars plus, but now you hardly do, we get only three or four thousand for the whole week, so imagine you are in a business centre and a client wants something like ten thousand dollars and the whole week you can’t even get three thousand and its very alarming ”.
Prices of imported goods to increase
But at Abbosey Okai traders are not happy with the current performance of the cedi. Abbosey Okai is home to dealers of car parts and engines, the centre commands a huge stock of foreign exchange daily and traders depend heavily on foreign currency because they import majority of their products.
The traders told Citi Business News they may be forced to push the extra cost to their consumers if the development does not change anytime soon.
”The cedi has not performed well this year, it took a short time to rise this way so people are now getting to know the changes, if it continues from next week we will be forced to increase the prices of our products”.
Finance Minister outlines measures to save cedi
Finance Minister Mr Ken Ofori Atta early this month announced that Government will use a number of fiscal policies and practical economic measures to stabilize the cedi.
He says in the medium term Government will have to relook at some of the developments in the economy to deal with the matter.
”The cedi’s instability, there are a number of things that we have to do and that’s where the one factory one district comes into the fore. We are now looking to see whether we can generate export and therefore diversify the economy,” he said.
He cited for example that government will heavily invest in the agriculture sector to help boost agro produce for export.
He bemoaned the habit where only the cocoa subsector was given the needed attention to the neglect of others. “I think our interest in the agric sector also looks to address this mono-crop of cocoa. Is that all we should be doing,” he said, adding that all the subsectors are potentially viable in increasing the country’s foreign exchange earnings.
Touching on remittances, Mr. Ofori Atta stated that there are plans to correct how foreign currencies remitted into the country get stuck before it is changed into the local currency.
“Even the issue of remittances and how in some instances, the dollars actually do not get here but we get cedis. We are going to look at it,” he said.
He added that government will also streamline some of the current engagement with the Precious Minerals to improve foreign exchange earnings.
“Fortunately we are confidence that oil receipts will also increase. So we are helpful. In the medium term is the balance between gas and crude where gas will increase considerably and that will reduce the need for crude import,” he said explaining that all these measures will increase foreign currencies in the country”.
By: Vivian Kai Lokko/citibusinessnews.com/Ghana