The cedi’s value declined on Thursday, just a day after the Chief Executive of Ghana Cocoa Board (COCOBOD) Joseph Boahene publicly explained their decision to forgo the traditional cocoa syndicated loan. After showing marginal gains last week following a period of stability, the cedi lost ground on the interbank market, with the dollar trading between GH¢15.70 and GH¢15.75 levels, up from GH¢15.60 GH¢15.72 levels on Wednesday.
The depreciation of the cedi was attributed to a drop in the supply of US dollars, reversing the trend seen last week and earlier this week when dollar supply exceeded demand. Currency Trader Kodzo Dziwornu told The High Street Journal that the reduced dollar supply is expected to continue weakening the cedi, stating, “I expect the cedi to remain under pressure today and the rest of the week.”
For over three decades, the cocoa syndicated loan has been a significant source of dollar inflow for Ghana, heavily relied upon to stabilize the cedi. In June, Finance Minister Dr. Mohammed Amin Adam highlighted the cocoa syndicated loan as a key inflow anticipated to curb the cedi’s depreciation, which has already lost more than 21% of its value this year. Similarly, Central Bank Governor Dr. Ernest Addison, during the July Monetary Policy Committee meeting, mentioned the loan as crucial for supporting the cedi in the second half of the year.
However, with the syndicated loan now off the table, the local currency faces increased pressure and may continue to depreciate, as it did in the first half of the year.
COCOBOD’s CEO maintained that the decision to abandon the syndicated loan was part of an effort to reduce the regulator’s dependence on international lenders. However, Bloomberg previously reported that negotiations between COCOBOD and international lenders had stalled because lenders were unwilling to provide the $1.5 billion loan due to a significant drop in cocoa production volumes to less than 430,000 metric tonnes, as well as a previous default on cocoa bills, a short-term instrument used by the regulator to raise additional funds.
With COCOBOD struggling to raise sufficient funds through the syndicated loan over the past two years, market observers are not surprised by the current situation. In the absence of this loan, managers of the economy will need to quickly identify alternative sources of dollar inflow to prevent a rapid depreciation of the cedi.
