Cedi: Appreciation of Local Currency Against Dollar Stirs Concerns As 3 Experts Remain Sceptical

Cedi: Appreciation of Local Currency Against Dollar Stirs Concerns As 3 Experts Remain Sceptical

  • The cedi's appreciation has been a relief for the business community and ordinary Ghanaians because it suggests inflation and cost of living could reduce soon
  • However, three experts are not convinced that the rapid rise of the cedi against the dollar is worth celebrating and have said things could get worse
  • Bright Simons, Prof Godfred Alufar Bokpin and Emmanuel Darkwa want Ghanaians to be measured in their excitement because the appreciation of the cedi is not founded on sound economic indicators

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Despite the cedi's unrestrained appreciation against the US dollar and other major trading currencies, three experts remain sceptical about the future of the local currency.

Two economists and a respected policy analyst believe the rapid rise of the Ghana cedi against the dollar is artificial and have warned against early celebration.

The cedi has been rising sharply against the US dollar in recent weeks.
A hand holds the highest cedi denomination, the BoG interbank exchange rate for December 16 and wads of dollars. Source: UGC, Getty Images, Twitter/@thebankofghana
Source: UGC

Interbank exchange rates announced by the central bank see the Ghana cedi continuing its four-week muscle-flex on the forex market, selling at less than GH¢10 to the dollar on Friday, October 16, 2022.

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Just last month, $1 was selling for close to GH¢15, meaning the cedi has appreciated by more than 30% in four weeks.

The cedi's consistent depreciation for more than six months between March and November 2022, hiked up prices of goods on the market, especially petroleum products and has raised cost of living.

Hence the rapid appreciation has strengthened hopes that inflation and general cost of living will also reduce, but three experts who have commented on the forex situation have unanimously warned against premature celebration and high expectations.

Ghanaian Experts Not Impressed By Cedi's 'Artificial' Appreciation Against The Dollar

Bright Simons, respected policy analyst attached to think tank IMANI Centre for Policy and Education; Prof Godfred Alufar Bokpin, a University of Ghana economist; and Emmanuel Amoah Darkwa, a chartered economist, don't seem impressed.

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BoG cites IMF deal among 3 reasons for cedi’s impressive appreciation

For Bright Simons, Ghana may be heading the way of Zimbabwe, whose local currency saw a temporary appreciation before depreciating rapidly to become the all-time worse performing currency against the US dollar currently.

Simons tweeted that the rapid rise of the Ghana cedi against the dollar is not a sign of recovery but a fever.

"There is literal jubilation on the streets as the Ghana Cedi surges against the dollar. The people deserve this happiness after the stress of recent months. But the leaders should worry about ANY wild swings. Volatility of this type is a sign of fever not recovery," he tweeted on Thursday, December 15, 2022.

Prof Bokpin wants Ghanaians to be measured in their expectations because the appreciation is not likely to last. Things could get messy, he fears.

He told Citi News that cedi's rise defies the time-tested economic principles. He said the rapid appreciation of the Ghana cedi is not founded on known and accepted fundamentals that can warrant such a good showing.

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Cedi’s momentum continues $1 now sells for GH¢10.70

“Because it is not driven by strong economic fundamentals, you cannot say it is going to last. But at least, what we have seen is good. It means the system is responding to the changes,” Prof. Bokpin said.

Then the chartered economist, Emmanuel Amoah Darkwa, also warns against early celebration. He does not want the heart of Ghanaian businessmen and women to be broken.

”It is too early to jubilate. We have to wait and monitor. These are factors that are sometimes external," he told an Accra-based local language radio station.

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

Meanwhile, YEN.com.gh has reported in a previous story that the Bank of Ghana explained that 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.

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On December 14, 2022, $1 was trading at an average rate of GH¢10.70 with a market range between GH¢10.70 to GH¢11.28. On December 16, $1 is selling for GH¢8.

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Source: YEN.com.gh

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