Ghana considering FX swaps to stabilize currency - Terkper

Ghana is considering using currency swaps to help stabilize the cedi, which has surged 22 percent against the dollar in less than two weeks.

The Ministry of Finance has begun talks with the Bank of Ghana about the contracts, Minister of Finance Seth Terkper said in an interview in the capital, Accra, on Friday. The cedi will probably continue its advance and then stabilize, he said.

“We will not be complacent about the currency’s gains,” Terkper said. “We are also encouraging more flows and managing the reserves.”

The cedi recouped almost all of its losses this year since the International Monetary Fund on June 30 said the government was on track to meet goals set as part of a loan of about $1 billion. The currency had plunged as much as 27 percent before then.

Ghana has a few options for swap contracts, including turning to local banks for dollars or large central banks like the Federal Reserve or European Central Bank, said Chris Becker, lead economist at African Alliance Securities, by phone from Johannesburg.

“They will then use the dollars or euros to maintain the currency or slow depreciation for a couple of months or a year,” he said. “I don’t think its sustainable because it means you’d have to be able to raise the foreign exchange to pay back.”

The cedi gained 0.1 percent to 3.545 per dollar at 5:55 p.m. in Accra. It pared it’s gain of as much as 4.7 percent after the news of the swaps.