Depreciation of cedi is alarming but we are working at it - NPP MP
The Member of Parliament for Sissala East, Ridwan Duada Abass has admitted on Frontline on Rainbow Radio 87.5FM the rate at which the cedi is depreciating against the dollar is serious.
Businessmen he noted are struggling but was quick to add that, looking at the rate at which the cedi is depreciating against the dollar is being managed by the current administration.
"I know the economic management team are not sleeping. They are working around the clock to stabilise the cedi against the dollar,’’ he added.
He attributed the situation to importation of every single commodity into the country saying, the importation alone is contributing to the depreciation of the cedi.
Majority of Ghanaian businessmen he noted depend on the dollar because of importation.
He assured Ghanaians the situation will change and admonished Ghanaians to move towards producing most of the things we import on our own because some of the things we import into Ghana, are appalling.
To him, the banking sector has a role to play especially when it comes to the interest on loans.
He was extremely worried banks were changing exorbitant rates on loans as compared to foreign businesses and what they enjoyed in their respective countries, a situation he admitted makes it unfavourable for local businesses to compete with foreign businesses.
The Nana Addo led administration he indicated is on course to help the private sector to thrive in order to increase production.
The Bank of Ghana recently announced the injection of $800 million to the country’s reserves this month to stabilise the cedi against major international currencies, especially the dollar.
The Head of Financial Markets at the central bank, Steven Opata, had said that the accumulation of more dollars would help increase the net international reserve (NIR) to around $4 billion, enough to provide confidence in the system and help stabilise the free fall of the local currency.
Data from the central bank show that the cedi has since January lost some 3.6 per cent of its value to the US dollar as the international investor community sold some of their investments in local securities and moved their funds overseas, partly causing the cedi to slide.
That caused some apprehension among the business community, prompting various private sector associations to urge the central bank to find a solution to the depreciation to help abate the impact on their operations.
Speaking to the Daily Graphic in an interview recently, Mr Opata said, the depreciation of the cedi per BoG’s research showed that the current movements were largely driven by local sentiments arising out of increased demand for forex by non-resident investors in the country’s bonds, increased demand by the energy sector to support imports and high offshore proceeds reported by the banks.
He also mentioned increased demand for forex by corporate bodies seeking to repatriate their profits and dividends and a wrong interpretation of the BoG’s recent adjustment to realign its rate and the average interbank exchange rate.
He said although the adjustment was to smoothen out rough edges to help create efficiency in the forex market, “it appears that the banks overreacted to that adjustment”.
“They saw that as a weakening of the currency and that is what started this rapid movement that we saw in the currency,” he said.