What The Experts Are Saying About The Cedi’s Strong Performance Against The Dollar

The cedi is one of the best-performing currencies in the world and is set to dip to GHS10 to a dollar for the first time in over two years. Experts have their say on why the cedi is performing so well.

Ghana's cedi is expected to strengthen further due to hard-currency inflows from remittances and continued Bank of Ghana support.

It has appreciated by 24.1% against the US dollar, 16.2% against the British Pound and 14.1% against the Euro according to the latest data by the Bank of Ghana.

Bloomberg, for example, named the cedi the world’s best-performing currency earlier in May.

Governor of the Bank of Ghana (BoG), Dr. Johnson Asiama, says the Central Bank does not have any specific target rate for the appreciation of the cedi.

Finance Minister Dr Cassiel Ato Forson hailed the strong performance of the Ghana Cedi, calling it a remarkable turnaround.

Ahead of the continuing strengthening of the cedi, YEN.com.gh looks at what top commentators have been saying about the performance of the Cedi.

Godfred Bokpin

A lecturer at the University of Ghana Business School, Professor Godfred Bokpin attributed the current trend in the value of the cedi is due to effective collaboration in the implementation of fiscal and monetary policies between the Minister of Finance and the Governor of the Bank of Ghana.

“If you look at what the economy has been through in the last 3 years, the excess injection of liquidity into the economy through high expenditure. We have seen this government do within five months what we have been calling for since COVID-19 (2020-2025)."

"Since COVID, we’ve been saying that we need to cut wasteful spending, so that we choose a gradual fiscal consolidation that will be less painful."

Bokpin also noted that the government is not borrowing as much, and this has been backed by strong export receipts.

Patrick Asuming

Economics Professor Patrick Asuming is more cautious about the sharp appreciation of the Ghanaian cedi and would have preferred a more measured and steady rise in the currency’s value.

He warned that the rapid pace of the cedi’s recent gains mirrors the same risks associated with swift depreciation.

“I will largely agree that the appreciation perhaps has gone a little too far, but even more importantly, I think that making the currency appreciate so quickly or so sharply over a short period, I am not sure, is a clever thing to do."

“It is not like we were in a period where the cedi was under pressure for which we needed to pump dollars to support it.”

Bright Simons

Thought leader and social commentator Bright Simons noted increased dollar inflows because the price of Ghana's main export commodities has surged.

But he noted that cedi rallies in Ghana are based on pure market sentiment, and thus do not last because the structural demand stays unchanged.

He expects speculators to try to start buying more dollars in expectation of renewed cedi depreciation.

"It is thus very likely that the Cedi's rally on the back of market sentiment could hit a structural block in coming months unless the inflation and interest rate indicators adjust quickly enough to remove the arbitrage distortions that have opened up due to the misalignment of the exchange rate with other major determinants of market prices."

Prof. Eric F. Oteng-Abayie

Economic policy analyst Professor Eric F. Oteng-Abayie attributed the Cedi’s resurgence to a confluence of domestic policy reforms and favourable global economic conditions.

Oteng-Abayie noted strategic initiatives such as the Bank of Ghana’s Gold4Oil, significant fiscal discipline under the IMF-backed economic recovery plan, and rising investor confidence.

“The Cedi’s recovery is no coincidence. It is the result of deliberate policy choices, particularly the Bank of Ghana’s Gold4Oil and GoldBod initiatives, which have significantly bolstered foreign exchange reserves and investor confidence."

He singled out the Bank of Ghana's requirement that 20% of gold export proceeds be converted into cedis, in addition to a $490 million forex market intervention in April.

Source: YEN.com.gh