President John Mahama says the free fall of the cedi free should be blamed partly on global currency volatility.

He explained that the situation led to the near collapse of the Eurozone and also affected the fiscal stability of most emerging economies including India, adding, “In the first half of this year, we have had concerns about the depreciation of the cedi. This has resulted from a combination of factors.”

The daily depreciation of the Ghana cedi against major currencies has become a major headache for economic managers of the country.

Statistics show that the cedi has lost over a third of its value since Ghana began producing oil in November 2010, trading currently at around 1.98 and 2.1 per dollar.

While some analysts attributed the decline to the surging demand for the dollar and other currencies by both local and foreign investors and businesses mainly to cover import bills, others have blamed the currency weakness on trade with China, as many traders are accumulating actual paper cash in dollars due to the lack of effective transfer channels for the Yuan in Ghana.

Renaissance Capital has even predicted another 5 per cent to 10 percent depreciation before end of 2012.

To address the situation, the Central Bank raised interest rates by 250 basis points, starting from February, to halt the currency from further weakening but that did not fully address the cedi-dollar relationship.

President Mahama, delivering his ‘Critical Policy Actions – September to December 2012’ in Accra Tuesday, said the bill for non-oil import doubled and also put more pressure on the country’s foreign exchange reserves.

“Last year, we spent twice as much foreign exchange on non-oil imports as the year before. This put pressure on our reserves of foreign exchange as our import bill continued rising. This must give us pause for thought.”

He said in spite of the weakened cedi “we have made tremendous strides in bringing down the rate of inflation to single digits.

“We have increased productivity and more value-added in agriculture and improvements in road infrastructure, especially in rural areas have meant more stable prices of food with positive consequences for inflation.

“However, we remain a substantially importing country, a situation which has consequences for our foreign exchange resources.

The President said his economic team had managed to “arrested the decline in the value of the cedi and it is gradually stabilizing against major foreign currencies.”

“The measures that the Bank of Ghana (BoG) has instituted in respect of foreign capital movements are legitimate, long-overdue exercise, and full compliance from all financial institutions would establish a more stable and predictable regime for the stability of the cedi.

He said he had instructed the Economic Management Team to take immediate steps to consolidate and sustain macro-economic stability by holding down inflation, halt cedi depreciation and maintain discipline in government expenditure.