Cedi Depreciation: Economist Backs Injection Of $2 Billion To Strengthen Struggling Local Currency

• A finance expert has scored good marks for the government's decision to inject $2 billion into the Ghanaian economy
• Dr Theresa Mannah-Blankson has said the move should balance the demand and supply of the American green buck in Ghana and ease pressure on the cedi
• She, however, warns the government to proceed cautiously

An Economist has said the upcoming injection of $2 billion into the Ghanaian economy should balance the demand and supply of dollars, and possibly hold the cedi depreciation.

Dr Theresa Mannah-Blankson, a Fellow of the Finance and Economics Pillar of the Centre for Social Justice (CSJ), said the strategy by the government could yield some possible results for the struggling cedi.

She noted, however, that the effectiveness of the move would depend on the actual shortfall of dollars in the economy.

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"As was noted in the press release from the Bank of Ghana on the depreciation of the Cedi, some factors for the cedi's depreciation include the exit of non-resident investors from our bond market and increases in import bills from crude oil et cetera. Which means there is a need to provide more dollars to the market to meet the current demand," she told YEN.com.gh in an exclusive interview.

Communication Minister Kojo Oppong Nkrumah announced on Tuesday, August 23, that Ghana was expecting critical loans from the international market to shore up forex supplies and ease pressure on the cedi.

According to the Minister, $750 million is expected from Afremix Bank in one week. Additionally, $1.3 billion in proceeds from the cocoa syndicated loan would also hit Ghana's accounts in a few days.

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Speaking on Accra-based Citi FM, the minister advised people holding on to dollars to sell them quickly since the cedi's free fall, which peaked at a little over GH¢10 at forex bureaus last week, would soon end.

While some analysts have said the announcement targets speculators scheming to profit from the cedi's woes, Dr Manah-Blankson said in principle that the measure holds promise to prevent the cedi from falling.

She, however, admonished the government to proceed cautiously.

"Pushing the entire amount [$2 billion] into the market could potentially result in running down our supply within a short time if the speculation escalates," he advised.

Demand For Dollars More Than Supply

Latest figures from the Bank of Ghana show that the demand for US dollars by dealers has outstripped supply by $84.5 million. However, this is a reduction of the $105.25 million recorded during the last auction a fortnight ago.

According to a Joy News report, sale of dollars through the Forex Forward Rates Auction to dealers, the Bank of Ghana was only able to supply $25 million to the dealers, largely the banks.

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The bids submitted for the purchase of dollars were estimated at $109.5 million, compared with $130.25 million two weeks ago, that is, on August 9, 2022.

Source: YEN.com.gh