Steve Opata, director of financial markets at the Bank of Ghana, told Bloomberg that the current rate is only a reflection of broader risk-off sentiments to emerging economies and as such is fleeting.
“The performance of the cedi doesn’t correlate with the fundamentals,” Opata told Bloomberg in a phone interview in Accra. “Because it is sentiment-driven, it should correct. It’s a temporary situation that will correct’’
The Bank of Ghana lowered its interest rates by 100 basis points to 16 percent earlier in the year, a move that caught analysts and experts by surprise.
Lower rates resulted in the depreciation of cedi in a magnitude that puts Ghana’s currency as the worst performing so far in 2019, of 40 currencies tracked by Bloomberg.
Consequently, Ghana’s Bond market has been failing to attract foreign investment worsening the paucity of the dollar in the economy.
In spite of the unimpressive situation, Opata argued that Ghana’s favourable trade posture strengthens the argument for recovery as Ghana’s external economy has shown convincing performance with two trade surpluses, narrowing current-account and fiscal deficits.
As at Thursday, GH₵ traded at 5.33/US$ in the parallel market and 5.1577/US$ in the interbank market.
Bloomberg reports that foreign-currency inflows of $850 million before the end of March, including a $300 million loan for the cocoa regulator, will replenish reserves of the “Gold Coast” that have decreased to $7 billion at the end of December, from $7.6 billion the year before.
