The Ghanaian cedi has recorded impressive gains in recent days, but this appreciation seems to be limited to interbank transactions, with little to no change in the rates at forex bureaux. While the cedi moved from about GH₵16.55/GH₵16.65 to the dollar a week ago to GH₵ 16.10/GH₵16.10 on the interbank market by Friday, the dollar continues to sell between GH₵17.15 and GH₵17.20 at forex bureaux, widening the gap between the two rates.
It remains unclear whether this disparity is due to a lag in transmission from the interbank market to forex bureaux or if sustained demand for the dollar is keeping prices high at the forex points.
The cedi has been making significant gains over the past 10 days due to the daily supply of dollars on the interbank market by the Bank of Ghana (BoG), sometimes exceeding demand. This has been made possible through the significant accumulation of foreign reserves and anticipation of new inflows from the next IMF disbursement, expected in the first week of December.
Market watchers are concerned that the pass-through effect is not being felt at forex bureaux. Some speculate that those purchasing dollars on the interbank market might be holding onto them instead of trading, which would otherwise push rates down at the forex bureaux. Others argue that if the BoG continues to inject dollars into the system, the rates at forex bureaux will eventually begin to drop.
Gains in the value of the cedi at the forex bureaux are often more impactful as many traders rely on these outlets for their import needs, which affects the pricing of their goods.
Meanwhile, economist Dr. John Kwakye has expressed concerns that the BoG’s efforts to reduce the dollar rate could deplete its reserves. Two weeks ago, Dr. Kwakye argued that the central bank would not be able to stabilize the cedi due to its accumulation of dollars in line with the IMF programme and suggested that any efforts to do so would not be sustainable. Now, he warns that the BoG’s decision to inject more dollars into the system will leave it with fewer reserves.
“As I anticipated, the cedi is being stitched in the few weeks to the election. But at what cost? BoG will end up poorer in reserves,” Dr. Kwakye posted on X (formerly Twitter).
The period from January to March typically sees rapid depreciation of the cedi due to high corporate demands and traders needing to pay for imported goods bought on credit. Some analysts worry that the central bank’s current moves to shore up the cedi could leave the next government with insufficient reserves to meet the high dollar demands expected in the first quarter of 2025.
