Cedi Continues Slide.....

....Central Bank Blamed For Depreciation

The Cedi continues to slide in value against the major trading currencies. According to the Databank, a local investment bank, the Cedi depreciated 13% against the Euro, 8% against the Pound Sterling and 8% against the US dollar from the beginning of the year to date. Currency traders blame the depreciation on force supply constraints.

“The cedi will dip further against the major trading currencies because Bank of Ghana (BOG) is not intervening to review the rate,” Beatrice Odonkor of the Barclays Bank Treasury.

“BOG’s intervention to ensure that the supply side is there to support the cedi is slow. They are supporting the market with funds intermittently, by providing forex to banks”, she added. Currency dealers say BOG’s support is not heavy enough to stem the demand pressure on the cedi. Dealers are also unanimous in their opinion that the depreciation of the cedi is a cyclical phenomenon.

Dealers have assigned various reasons to the continuing depreciation of the cedi. According to them, government’s spending taps have been opened. Arrears owed road contractors have been paid and contractors now have funds to support purchases of spare parts, machines and other materials for their projects.

The dealers also attributed the demand for forex to increase in crude oil imports for the Aboadze thermal plant in the wake of energy crisis. Although some dealers doubt if the depreciation will feed into inflation, monetary experts say the doubt is unfounded because the money supply includes all dollar deposits.