Cedi Appreciation Caused By IMF Deal, Monetary Policy And Drop In Imports – Bank Of Ghana

Cedi Appreciation Caused By IMF Deal, Monetary Policy And Drop In Imports – Bank Of Ghana

  • Bank of Ghana has said the IMF deal, its Monetary Policy and reduction in imports is the reason for the cedi's recent appreciation
  • Director of Research at the Bank of Ghana Dr. Philip Abradu-Otoo has said a myriad of factors have contributed to the cedi's appreciation
  • As of December 14, $1 was trading at an average rate of GH¢10.70 with a market range between GH¢10.70 to GH¢11.28

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The Bank of Ghana has cited three key reasons for the cedi’s impressive performance against the United States dollar and other trading currencies in the last couple of weeks.

In the last three weeks, the local currency has ended its six-month poor run against the major trading currencies and has gained a little over 6% of its value.

From January 2022, the cedi has lost 53.8% of its value against the major currencies especially the dollar.

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The cedi has been appreciating against the dollar in recent times.
Wads of Ghana cedis and US dollars. Source: UGC.
Source: Facebook

It moved from about GH¢6 to a dollar at the beginning of the year to GH¢15 to a dollar in November 2022.

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But since mid-November 2022, the local currency has been appreciating steadily. Current interbank exchange rate show the Ghana cedi is selling for about GH¢10 to $1.

Many have been wondering the cause, with some speculating that the cedi’s recent impressive run is cosmetic.

However, Director of Research at the Bank of Ghana, Dr. Philip Abradu-Otoo, has said a significant reduction in imports, the central bank’s monetary policy and the staff-level agreement reached between Ghana and IMF for the 3 billion bailout have been triggers of the cedi’s strong showing.

“Anytime there is an exchange rate overshoot like we saw, imports tend to go down,” Citi News quoted him in a report.

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Dr Abadu-Otoo explained that the more dollars importers needed the higher the cedi’s depreciation.

He also said the Bank’s monetary policy have played out well for the local currency.

“So 15% of all deposits in the banking sector were supposed to be locked as reserves. It was designed to try to prevent excess liquidity from passing into the economy to demand dollars. That policy was successful,” Dr. Abradu-Otoo said.

He added the announcement of the staff-level agreement for the Extended Credit Facility has been helpful.

“That in itself brought some confidence that the outlook looks very good,” he stressed.

Local Currency Grows From Strength To Strength As $1 Now Goes For GH¢10.70

Meanwhile, YEN.com.gh has reported in a separate story that the good showing of the Ghanaian cedi continued unabated on Wednesday, December 14, 2022, as it appreciates significantly for another week running.

The cedi’s momentum against the United States Dollar and other global trading currencies appears not to be slowing down anytime soon.

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As of December 14, $1 was trading at an average rate of GH¢10.70 with a market range between GH¢10.70 to GH¢11.28.

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Source: YEN.com.gh

Authors:
George Nyavor avatar

George Nyavor (Head of Politics and Current Affairs Desk) George Nyavor writes for YEN.com.gh. He has been Head of the Politics and Current Affairs Desk since 2022. George has over 9 years of experience in managing media and communications (Myjoyonline and GhanaWeb). George is a member of the Catholic Association of Media Practitioners Ghana (CAMP-G). He obtained a BA in Communications Studies from the Ghana Institute of Journalism in 2010. Reach out to him via george.nyavor@yen.com.gh.

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