The relative stability that the cedi enjoyed at the beginning of August has been reversed, as the currency enters a new period of depreciation, with the US dollar crossing the GH¢16 mark once again. Currently, some foreign exchange bureaux are selling the dollar at GH¢16.20 to GH¢16.30, while on the interbank market, the dollar began trading on Monday at GH¢15.72 to GH¢15.80, compared to GH¢15.60 to GH¢15.70 levels just a week ago.
In May of this year, the cedi briefly reached GH¢16 against the dollar but pulled back after several administrative measures were implemented, including the arrest of black-market operators. However, the renewed depreciation, which began just a day after the Ghana Cocoa Board (COCOBOD) announced it would not be securing the annual cocoa syndicated loan of approximately $1.5 billion, has raised concerns.
The syndicated loan, traditionally sourced each year, is a significant inflow that helps stabilise the cedi. Both the Governor of the Bank of Ghana, Dr. Ernest Addison, and Finance Minister, Dr. Mohammed Amin Adam, had identified the cocoa loan as a key inflow expected to support the cedi in the second half of the year.
Prior to COCOBOD’s announcement, the cedi had shown signs of recovery against the dollar. Market analysts told The High Street Journal that an influx of dollars exceeding demand was anticipated, driven by expectations that the Bank of Ghana would inject more dollars into the market. However, with the absence of the cocoa syndicated loan this year, market sentiment appears to have shifted. The Central Bank may now be more cautious in its interventions due to limited foreign exchange inflows, contributing to the cedi’s renewed depreciation.
COCOBOD has downplayed the potential impact of foregoing the syndicated loan, arguing that it will save the country approximately $150 million in interest payments to lenders. Nevertheless, market analysts believe that the Central Bank needs to intervene in the foreign exchange market, even with a small amount, to prevent the cedi from resuming its rapid depreciation.
Additionally, increased government borrowing in the treasury bill market during August could signal a departure from the fiscal discipline observed in the first half of the year, particularly as electioneering activities intensify. This could prompt individuals and businesses to purchase foreign currency to safeguard the value of their funds, further pressuring the cedi.
