Measures to address cedi fall underway – Bank of Ghana

The Bank of Ghana (BoG) has urged the public to remain calm as it implements measures to boost the foreign exchange position of the country and help restore confidence in the cedi.

As part of the measures, the central bank said it was increasing foreign currency (FX) supplies to banks in the short term to help meet growing FX demands for external payments.

It added that the increased supply of forex was necessitated by growing demand for hard currencies by non-resident investors leaving the jurisdiction.

The central bank said the high crude oil price has also increased the country’s oil import bill astronomically, forcing the bank to provide more hard currencies to meet demand.

The assurance from BoG follows public outcry over the steep fall in the value of the cedi recently.

The cedi depreciation deteriorated sharply this year as demand for forex overtook supplies at a time when high debts and low investor confidence have made it impossible for the country to access the international capital market for borrowing.

The cedi lost more than 20 per cent of its value as of July.

It now trades almost to GH¢10.00 to one US dollar.

Last week, the Ghana Union of Traders Association (GUTA) called for pragmatic measures to arrest the fall, noting that businesses were bleeding from the depreciation.

The Association of Ghana Industries (AGI) have also raised similar concerns, citing the impact on cost of operations.

In response, BoG said various factors, including the rebound in the strength of the US dollar, were causing the cedi to depreciate faster.

“The US dollar has become stronger and making other currencies including the Ghana cedi weaker. From the beginning of the year to date, the pound sterling has weakened against the US dollar by 10.8 percent while the Euro has also weakened by 10.1 percent. Countries similar to Ghana (Ghana’s peers) are all experiencing sharp depreciation, averaging 11.5 percent from year to date” BoG made it known in a statement.

It added, “With ratings agency downgrade, Ghana was not able to tap the Eurobond market. Over the past three years Ghana has consistently raised US3 billion from the Eurobond market to help finance the budget. Loss of market access this year implies that no new fresh injection of capital and this has created a huge FX supply problem and constrained the ability of the Central Bank to provide for greater support for the currency. Intervention data shows that BOG’s presence in the market this year so far has been lower compared to 2021.”

Detailing measures put in place to address the situation, the Bank of Ghana revealed they are engaging into “Gold Purchase Program to increase foreign exchange reserves. Special Foreign Exchange Auction for the Bulk Distribution Company’s (BDCs) to help with the importation of petroleum products. Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.

“The Bank of Ghana is supporting the banking sector with foreign currency liquidity to help meet demand for external payments. The recently approved USD750,000,000 Afriexim loan facility by Parliament, once disbursed, will boost the foreign exchange position of the country and help restore confidence.”

It added, “In the short term, we expect that when the IMF programme is finalized, it will also go a long way to help restore confidence in the economy and drive portfolio flows. These measures will go a long way to increase the foreign exchange reserve position of the Central Bank.”