Currency dealers are warning that the demand for the dollar will rise in August as importers begin placing orders for Christmas goods. Traditionally, the cedi has depreciated from August through November, a trend exacerbated in the past two years by delays in the cocoa syndicated loan and Ghana’s exclusion from the capital market due to its debt distress.
As July ends, market watchers are urging the Bank of Ghana and the government to take proactive measures to prevent a rapid depreciation of the cedi. Kodzo Dziwornu Letsa, Currency and Fixed Income Trader explained that “During the third quarter, seasonal trends indicate that demand for the greenback will start building up from next month, continuing through the third quarter and into the fourth due to goods being imported for Christmas activities. Therefore, there is no respite for the cedi in sight, at least not this quarter.”
Another threat to the cedi’s stability is the rising cost of fuel on the international market. Ghana’s oil imports increased from $422.6 million in May 2024 to $428.3 million in June 2024, placing significant strain on the cedi and potentially undermining recent economic gains.
The bid/offer ratio is currently around GH¢15.67/ GH¢15.77, indicating a 1.48% decline in the cedi’s value relative to the US dollar. The spike in oil imports has led to increased demand for foreign exchange, further pressuring the cedi. In response, the Bank of Ghana sold $40 million to oil importers through the Bulk Distribution Companies (BDCs) forex auction.
To prevent a free fall of the cedi typically seen during this period, the Central Bank will need to sustain its interventions and act earlier. Although the country’s Gross International Reserve has increased from 2.9 months of import cover in May to 3.1 months in June, this offers limited comfort for the government to intervene regularly in the market. Other analysts suggest that the government may need to seek additional dollar inflows from Afrexim Bank or expedite the process to secure the cocoa syndicated loan by its traditional month of September, rather than November or December as has been the case in recent years.
