Bawumia blames IMF 'time inconsistency' for cedi fall

An inconsistency in the timing of seven prior actions of the International Monetary Fund on reserves target is largely to blame for the recent depreciation of the Ghana cedi, Vice-President Dr Mahamudu Bawumia has said.

The local currency has recently been struggling against the major international trading currencies, especially the dollar, a situation that negatively affected the local business community.

Speaking at an Economic Management Team town hall meeting at the College of Physicians and Surgeons in Accra on Wednesday, 4 April 2019, Dr Bawumia explained that: “The most important and the proximate cause of the recent depreciation of the cedi is the time inconsistency of the IMF prior action on the reserves target.

“At the end of January, as part of the seven prior actions to get to the IMF board and the completion of the IMF programme, the IMF gave Ghana seven actions to complete before March 15.

“One of the conditions that the Bank of Ghana had to meet was to increase its net international reserves to the level of December 2018.

“To increase the net international reserves, however, meant that the Bank of Ghana could not sell any foreign exchange in the market; they had to essentially hold their hands to the back and could not intervene on the market during this particular period. So, the demand for foreign currency was not met by supply as normally happens on a day-to-day basis and we all know when the demand is greater than supply the price will go up.”