‘Global pressures caused cedi fall’

The Bank of Ghana (BoG) has attributed the rapid depreciation of the Cedi against major foreign currencies to developments in advanced countries, especially the US.

In a recent meeting with the media in Accra, Dr Henry Kofi Wampah, BoG Governor, said foreign exchange market pressures, together with domestic pressures, increased risks to inflation and exchange rate.

“As a result, we have seen a decline in the real yield on Cedi assets relative to foreign assets,” he emphasised.

Even though Dr Wampah noted that developments in the fiscal and external sector, together with global pressures, resulted in the depreciation of the cedi by 14.6 percent against the US dollar last year, compared to 17.5 percent in 2012, Bloomberg, in a recent report, said the Ghana Cedi slumped 23 percent in 2013, making it Africa’s worst performer after the South African rand.

However, the BoG’s Governor stressed: “We have observed a much faster pace of depreciation since end-December 2013.”

He added that at the end of January 2014, the Cedi had depreciated by 7.8 percent against the dollar compared to 0.2 percent in January 2013.

“The commencement of tapering in asset purchases in the US, alongside weakening economic conditions in some economies, has spurred reversal of capital flows and volatility in currency and equity markets across many emerging and developing countries. The fallouts have been most severe in countries such as Turkey, Argentina, Indonesia, Malaysia and South Africa.”

Analysts have argued that the steps taken by the Central Bank to check the cedi fall could see companies going all lengths to get dollars to pay for imports.

The BoG said the currency market had been automated in most parts of the world so Ghana should toe that line.

So far, BoG has released a total of $60 million onto the market for use by banks, whose customers want them for foreign transactions.

The commodity markets have also been affected by developments in the US economy and other advanced countries.

Gold prices are projected at $1,292 an ounce in 2014 lower than the $1,411 an ounce in 2013.

Brent crude prices are also expected to average about $104, this year, down from last year’s average of $108.4 per barrel.

“Cocoa prices could pick up in 2014,” Dr Wampah said.