For individuals and businesses who are easily thrown into a state of anxiety and apprehension whenever the Ghana cedi shakes a bit on the forex market, the Bank of Ghana Governor says, “take a chill pill.”
Dr. Johnson Asiama says such fluctuations are a normal part of how the currency is managed by the Central Bank and hence, no cause for alarm or panic.
Speaking at the Monetary Policy Committee press conference, Governor Dr. Johnson Asiama explained that Ghana operates a managed floating exchange rate system. This, he broke down as a system that allows the cedi to move up and down in response to economic shocks, while the central bank steps in to prevent excessive and disruptive swings.
The little upward and downward movements, he says, are not a sign of trouble. What matters, he noted, is that volatility does not become extreme or persistent.
“What we have is a managed floating system. What that means is that you allow the exchange rate to adjust to shocks. It’s part of the process. The cedi must move up, but then it must move down. Our objective is to ensure that the volatilities are not excessive. So don’t get worried if you see the cedi moving a little bit. It is normal,” he signaled to the market.
Dr. Asiama pointed out that short-term factors can easily push the cedi in either direction. He mentioned factors such as market uncertainty, rumours, and speculative behaviour as some of the causes of temporary shifts in the exchange rate.
The governor was quick to add that even when there is nothing fundamentally wrong with the economy. These are often driven by sentiment rather than real economic weakness.
These short-term movements, he distinguished from more serious concerns. If exchange rate pressures become prolonged, they may reflect deeper issues such as excessive growth in the money supply. But, according to the Governor, current developments fall firmly in the short-term category and are expected to settle.
He assured the market that the central bank is actively monitoring trends and strengthening the market framework. Major reforms introduced last year are already improving how the foreign exchange market functions, particularly in the interbank space where banks trade currencies among themselves.
More reforms are planned this year to further smooth the flow of foreign exchange.
“There are short-term factors, uncertainty of any kind, speculative behaviours, some noise in those can just move the rate, not because anything is wrong. If those movements become persistent, then you might notice factors such as high monetary growth,” he stated.
He added, “We are observing the trends. We are working. Our financial market is on top of the job. We announced a number of reforms in the financial markets last year. This year, we are going ahead with further reforms. The interbank FX market is working better now. So we believe that FX intermediation will become more fluid going forward. So the city should be relatively stable going forward.”
This assurance from the governor is meant to calm businesses and households who are heavily reliant in the movement of the cedi. He says a slight dip does not automatically mean prices will spiral or savings will be wiped out. It is part of a system designed to absorb shocks without breaking.
Dr. Asiama expressed confidence that foreign exchange trading will become more fluid and transparent, helping to keep the cedi relatively stable over time.
