Increased demand for the dollar by corporate institutions has led to a renewed depreciation of the cedi. According to the Bank of Ghana, the cedi lost about 19.6% of its value by mid-July but the rate of depreciation on the retail market was much higher. The local currency had enjoyed some stability days after the International Monetary Fund (IMF) disbursed its third tranche. However, from Monday, July 22, the cedi began depreciating again.
Currency trader Kodzo Dziwornu Letsa told the High Street Journal that the cedi started losing value due to increased demand for the dollar by companies. ” The FX market market was heavily active. Firm demand for the greenback continues to push prices higher”. Despite the Central Bank’s intervention, which involved selling dollars on the interbank market, the local currency continued to lose value. On July 22, the dollar opened trading between GH¢15.54 and GH¢15.58, and by July 26, it was trading between GH¢15.64 and GH¢15.70.
With only 3.1 months of import cover, the Central Bank’s ability to continue injecting dollars into the system is limited. This limitation has fueled suggestions that the cedi is likely to continue depreciating in the coming weeks. Any further depreciation of the cedi will worsen the cost of goods and services and increase the country’s debt, which stood at GH¢742 billion at the end of June this year.
Meanwhile, importers are likely to start placing orders from August for the Christmas season. When this begins, there will be additional pressure on the dollar, which could further exacerbate the cedi’s depreciation.
