Since the beginning of August, the cedi has maintained relative stability, coinciding with the Bank of Ghana’s (BoG) introduction of new regulations for forex bureaux. Starting the month at GH¢15.70 and GH¢15.80 against the dollar on the interbank market, the cedi’s value has remained steady as of August 13. Currency traders attribute this stability to reduced demand for the dollar.
The cedi has had a challenging year, losing approximately 19.6% of its value by mid-July. A further decline occurred in late July due to increased dollar demand. However, since August 1, the cedi’s depreciation has paused, with market analysts citing a few key reasons for this shift.
One factor is the renewed confidence in economic recovery, bolstered by the Mid-Year Budget Review, which indicated that the government has adhered to its budget limits. This confidence may be discouraging dollar purchases as a store of value, leading to reduced demand for the currency.
Another reason is the BoG’s new forex regulations, effective from August 1. These include mandatory biometric verification and the use of either a Ghana Card or passport for foreign currency transactions at forex bureaux. Additionally, all bureaux are now required to use a centralized foreign exchange trading platform, ensuring real-time monitoring of transactions. This system places checks on currency dealers, with any unusual pricing potentially leading to sanctions, including the loss of licenses.
While these measures have contributed to the cedi’s stability, some forex bureaux operators have reported a decline in business, as customers are reluctant to provide biometric details. This may have also reduced forex transactions.
However, analysts are uncertain how long this stability will last, especially as the third quarter ends and the fourth quarter begins, a period typically marked by increased economic activity and higher demand for the dollar. A significant risk to the current stability is the government’s ability to maintain budget discipline in the lead-up to the December elections, where spending pressures may increase.
