BoG tempers cedi anxiety, confirms sovereign bond plans

The Bank of Ghana (BoG) has said the recent weakness of the cedi is seasonal, and that it stands ready to ensure stability of both foreign exchange demand and supply.

Strong import demand and dollar flight as companies repatriate dividends to offshore shareholders have caused the cedi to retreat sharply since the end of March, losing more than 3 percent to the dollar since start of year, on top of 17.5 percent depreciation in 2012.

But BoG Governor Henry Kofi Wampah said this week that this trend is consistent with the past, as demands for foreign exchange tends to be high and supply to be low around this time of the year.

"Demand is high around this time of year due to the settlement of import bills after the festivities, as well as demand from the corporate sector to meet dividend transfers. On the other hand, however, supply is also low as most our forex receipts come during the second half of the year" he said.

"The BoG will increase supply of foreign exchange - as we are currently comfortable with the level of our reserves - and on the demand side, the bank will continue with its tight monetary policy stance", he added.

Robust economic growth, which notched 7.9 percent last year, continues to drive import spending as the country's manufacturing sector remains too weak to supply the needs of an increasingly upmarket consumer class.

The effect of a weak cedi is more expensive imports, which drives inflation, and higher cost of inputs for business that import raw materials.