Election and the cedi

The passing of the December 7 elections has brightened the outlook for the cedi against its major trading currencies, Adam Nyinaku, Head of Treasury at the Bank of Ghana (BoG), has told the B&FT.

The local currency, whose sharp depreciation in early 2012 was blamed partly on investor behavior during the election years, is not expected to incur any deep losses now that the polls have ended, he said.

“We had all this depreciation because of the election. And now that election is over, we don’t expect any wide depreciation”.

He said currency’s slide (based on the BoG’s transactions rate) eased to 17.4% year-on-year at the end of November, from 18% in August.

The depreciation has slowed to 14.2% on the forex bureau market and 14.3% on the interbank market, he added.

An unresolved challenge, however, seems to be the widening of the budget deficit to 7.3% of GDP in the first nine months of the year, and analysts have warned of harsh consequences in 2013 if the gap continues to widen.

The Finance Ministry estimated in July that the fiscal gap will be equal to 6.7% of GDP for the whole of 2012.

But Dr. Joe Abbey of the Centre for Policy Analysis (CEPA) said in an interview that “it would be a miracle if the deficit ends the year below % of GDP.”

He added that fiscal situation next year is going to pose very serious problems.