Cedi will remain strong - Bank of Ghana

Ghana’s local currency will continue to enjoy stability against the Amerian dollar and other major currencies in the medium to long term, Governor of the Bank of Ghana (BoG), Dr Abdul Nashir Issahaku has assured Ghanaians.

He expressed confidence in the stability of the cedi in the medium to long term.

Reacting to reports of a further fall in value of the currency, especially against the dollar, the Governor said the outlook was rather bright.

“The tight policy stance, inflows from the cocoa pre-export finance facility and expected issuance of the Eurobond in the last quarter would boost reserves, improve liquidity on the foreign exchange market and support the disinflation process over the forecast horizon,” the Governor said.

The Governor was briefing journalists in Accra last Monday after the 71st Monetary Policy Committee (MPC) meeting which assessed the current economic conditions in the country.

Last week, London based Ecobank Research predicted that the Ghana cedi could trade between GH¢3.97 and GH¢4.10 to the US dollar in the next two months.

In its last Ghana Economic Strategic Report for Quarter 3, the research institution said the dollar will be in high demand in tandem with a robust import demand.

It explained that “the Monetary Policy Rate will be cut once there is a clear indication that inflation is slowing and that the Ghana cedi stability has continued”.

Over the past six months of 2016, volatilities in the foreign exchange market have subsided significantly alongside relative stability in the local currency largely supported by tight policy stance and improved foreign exchange inflows.

According to the MPC, the cedi, on the interbank market depreciated cumulatively by 3.3 per cent against the dollar for the first half of the year, compared with 26.1 per cent over the same period in 2015.

The Committee which maintained the Bank’s policy rate at 26 per cent noted that growth prospects for the rest of 2016 would be impacted positively by the stability in the foreign exchange market, expected continued improvement in consumer and business sentiments and the realization of additional oil and gas production from the TEN oil fields.

Touching on the varied effects of the UK’s vote to leave the European Union (EU), the Governor said the initial assessments had shown that the currency appreciated sharply by about 5.7 per cent month-on-month against the pound sterling in June 2016, compared with 1.3 per cent depreciation in May.

Meanwhile senior Lecturer in Finance at the University of Ghana Business School, Dr Lord Mensah has expressed surprise at the Bank of Ghana’s decision to maintain the policy rate at 26 per cent.

According to him, macro-economic indicators such as the decline in inflation should have reflected in a drop in the policy rate.

“I think it is a surprise, with the maintenance of the policy rate. There is some kind of uncertainty around it as one is not sure when the rate will come down or move up. But for me looking at all the indicators on the ground, if you are really abreast with all that is happening on our macro-economic front, then I presume the rate should have come down,” he remarked. “We have seen inflation going down and most of the time the monetary policy rate is basically on inflation targeting and if inflation is coming down, it shows that there is a signal that interest rates can come down for businesses to borrow,” he added.