That’s the message from John Awuah, CEO of the Ghana Association of Banks, who is urging policymakers not to get carried away by the cedi’s current momentum.

Speaking on PM Express Business Edition on Thursday, May 29, Mr. Awuah cautioned that businesses are more interested in stability and predictability than dramatic swings, whether upward or downward.

“Let us not be too excited about significant appreciation,” he said.

“That is not exactly what the business community is looking for. The business community is looking at predictability — not that the currency has depreciated to ¢5 to the dollar, and tomorrow it is ¢10, another time it is ¢9.”

His warning comes as Ghana’s currency sees its strongest performance in recent months, aided by improved external inflows, better fiscal management, and a reduction in speculative demand.

He explained that for businesses to function properly, certain variables — especially the exchange rate — must be reasonably stable.

“You need to be able to plan effectively,” he said. “You need some variables to hold their own and not be oscillating significantly beyond levels that you are unable to predict and have a proper forecast.”

Even in conversations with banks, this instability makes it difficult for clients to provide reliable financial projections, he stated.

“If you are talking to your banks, your ability to project your revenue generation is hampered if a component of your revenue is foreign currency-based,” Mr. Awuah added.

He also addressed the role speculation plays in Ghana’s currency market, noting that a large chunk of past depreciation was driven by artificial pressures and not actual trade.

“I once stated — with no proper research behind it — that I could clearly read that the extent of speculation in the currency movement was between 20 and 30%,” he revealed.

“So if there was a depreciation, about 20 to 30% of that depreciation is not backed by any effective transaction, but by people who are just playing on the currency for temporary price adjustments to profit from the movement.”

According to Mr. Awuah, the current appreciation of the cedi is forcing speculators to reconsider, which is helping to reduce artificial pressures on the market.

“If the currency is able to hold its own, what you are doing is making that trade unattractive,” he explained.

“Now, the cedi is more attractive. So the people who are holding cedi are looking for cedi investments, because the currency is not depreciating as aggressively as we were used to in the past.”

While he acknowledged that there are multiple factors now working in favour of the cedi, Mr. Awuah urged a cautious approach.

He would not commit to whether the appreciation could bring the exchange rate back to single digits, but he expressed some optimism.

“I don’t want to say a wait and see, because I don’t have any reason to doubt the ability of the currency to hold its own,” he said.

“Coming down to single digits, I am not sure. But the point is, we must focus on stability.”

Source: Abubakar Ibrahim

Speaking on Joy News’ PM Express Business Edition on Thursday, May 29, Awuah described a worrying trend of currency manipulation, which he said accounted for as much as 30 percent of the cedi’s past declines.

“I once stated with no proper research behind it that I could clearly read that the extent of speculation in the currency movement was between 20 and 30%,” he said.

“So if there was a depreciation, about 20 to 30% of that depreciation is not backed by any effective transaction, but by people who are just playing on the currency for temporary price adjustments to profit from the currency movement.”

According to Mr. Awuah, these speculative players were not responding to trade imbalances or macroeconomic shocks; they were simply gaming the market for short-term gains.

“If the currency is able to hold its own, what you are doing is making that trade [speculation] unattractive,” he said.

“Now, the cedi is more attractive. So the people who are holding cedi, they are looking for cedi investments, because the currency is not depreciating as aggressively as we are used to in the past.”

He was quick to caution, however, that appreciation should not be mistaken for stability. For businesses, what matters is not necessarily a stronger cedi, but a stable and predictable one.

“We should not be too excited about significant appreciation,” he warned. “That is not exactly what the business community is looking for.”

He explained that wild swings in the currency’s value—whether positive or negative—make it impossible for businesses to plan effectively.

“The business community is looking at predictability. Not that the currency has depreciated to ¢5 to the dollar, and tomorrow it is ¢10. Another time it is ¢9.”

Inconsistent currency movements, he added, hurt forecasting, banking, and investment decisions.

“You need to plan effectively. You need some variables to hold their own and not be oscillating significantly beyond levels that you are unable to predict and have a proper forecast,” Mr. Awuah explained.

“Even if you are talking to your banks, your ability to project your revenue generation is hampered if a component of your revenue is foreign currency-based.”

While Awuah expressed some confidence in the current performance of the cedi, he avoided making bold projections.

“I don’t want to say a wait and see, because I don’t have any reason to doubt the ability of the currency to hold its own. Coming down to single digits, I am not sure,” he said.

Source: Abubakar Ibrahim

“If we were that heavy in terms of our support to the market, we would not be doing well with our reserves accumulation,” Dr. Zakaria told Joy News.

He described the cedi’s rally as credible and backed by real market confidence, rejecting speculation that the Bank of Ghana is drawing down its buffers.

“Unfortunately, if this were the case, market players who are very smart would have seen through it,” he explained. “The rally would have been short-lived. They wouldn’t trust you.”

Contrary to such speculation, Dr. Zakaria revealed that the central bank has been accumulating reserves faster than expected.

“We are even accumulating reserves much, much faster than what has been expected,” he said. “And that is why the market really thinks this can be sustained.”

On the quality of the reserves, he added: “These are not debt-creating reserves. These are organically accumulated reserves. At the end of April, we had over $10 billion. We expect to hit $11 billion by the end of June.”

Dr. Zakaria noted that these reserve levels exceed International Monetary Fund (IMF) targets. “The IMF program set a target of three months of import cover. We are now at 3.7 months using IMF metrics,” he said. “If you include petroleum funds, we’re around 4.7 months. That’s quite a lot.”

Highlighting the bank’s strategic approach, he said, “We have devised very strategic ways of meeting market demand while still accumulating external buffers.”

“This time is different,” he emphasized.

Dr. Zakaria also cited other factors supporting the cedi’s strength, including the IMF Staff Level Agreement, which sent a positive signal globally.

“We’ve had a Staff Level Agreement with the IMF. That sent a strong message globally. It means things are changing.”

He pointed to progress in inflation management and fiscal consolidation.

“Inflation dropped from nearly 24% to 21.2%. That’s progress,” he said. “Fiscal consolidation is also taking shape. Public sector borrowing has slowed sharply compared to last year.”

The Deputy Governor also spoke about liquidity management. “We’ve sterilised three times more than last year,” he explained. “So we’re keeping cedi liquidity tight while still meeting forex demand.”

“We are not intervening recklessly,” he stressed. “We’re building confidence, not burning reserves.”

“This is not smoke and mirrors,” Dr. Zakaria concluded. “This is real. And we intend to sustain it.”

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He said they want glory now while distancing themselves from the severe economic mess they created during their time in power.

During his appearance on JoyNews’ PM Express, the Ketu South MP accused the NPP of cherry-picking economic narratives to cover up its failings.

“They want to take credit for the recent cedi stability but forget that they were the very architects of the collapse,” he said.

“You can’t run away from the disaster and come back when it looks like a fix is on the way.”

According to Mr. Kwetey, the NPP’s behaviour is hypocritical and disingenuous.

“It’s almost as if they caused the house to burn down and now want applause for showing up with a cup of water,” he said.

“They ran away from every negative indicator—the inflation, the debt, the hardships—but now that the currency is inching back up, they want to suddenly own it.”

He accused the NPP of abandoning responsibility the moment Ghana’s economy spiralled under their watch, only to re-emerge with self-congratulatory rhetoric now that the NDC government is implementing tough but necessary reforms.

“If they had that much faith in their own economic team, why did they spend their last year in power pointing fingers and hiding behind excuses?” he asked.

Mr. Kwetey warned that Ghanaians must not fall for what he described as the NPP’s desperate attempt to stay politically relevant by distorting the facts.

“This is an opposition that created the crisis. Now they want to claim the recovery they did nothing to bring about,” he said.

He then turned his attention to the judiciary, suggesting the NPP is now in panic because they can no longer rely on the protection they allegedly enjoyed from the Chief Justice.

“The NPP’s worry is that they feel her departure makes it difficult for them now to feel safe when cases are brought against them,” he said.

“Because they are now afraid that the person who could possibly be manipulating the system to help them is no longer there.”

Mr. Kwetey was reacting to growing concerns around the Chief Justice, against whom a prima facie case has been established. For him, this is not about political vengeance but about principle.

“If the person in charge of the country’s justice system can’t be held to the same laws the rest of us must obey, then what kind of justice do we have?” he asked.

He added: “As far as I’m concerned, if she has done everything okay, there’s no problem. But if there’s a problem and it’s established, then that’s it. She has to go.”

When host Evans Mensah posed a counter question, suggesting that the NDC might also have a vested interest in removing her to ensure favourable court rulings, Mr. Kwetey dismissed the idea.

“We are looking for justice,” he stressed. “Justice simply means that if you truly abuse the system, you should go. Whether it benefits us or not is not the point. The point is that wrong is wrong.”

He said he trusts the Council of State and the individuals involved in reviewing the matter. “These are noble people, including a former Chief Justice and a former Speaker of Parliament,” he said. “They will not go on a witch hunt.”

He also defended President John Mahama’s leadership and sense of fairness. “I know John Mahama. He’s not petty. He doesn’t target innocent people. But once a case is established, we must act.”

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This will affect imported products and other items brought in by members of the Food and Beverage Association, which includes beverage manufacturers, importers, firms in the food chain industry, and transporters.

The review has been influenced by savings made by members due to the cedi’s record appreciation against the dollar in the first quarter of this year.

“Prices have been reduced by 7% at the wholesale level. The impact on the market will be felt between now and next week. However, on the local production side, it is going to take time,” Executive Secretary of the Association, Samuel Aggrey, said.

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According to him, the government’s fiscal and monetary policies drive the achievement of low inflation.

Dr. Nunoo’s recommendation comes on the heels of President Mahama’s 120-day social contract, where he touted achievements by his government in improving the country’s economy.

He however noted that while the government is yet to fulfill some of the promises, the overall economic outlook remains encouraging.

“So far, so good. If you look at all the indicators like the inflation rate, the stability of the cedis, things are looking positive. If the government continues this way, we will see sustained economic growth,” he said.

Dr. Nunoo acknowledged that not all promises in the President’s 120-day social contract could be immediately fulfilled.

“Some policies will take time to materialize. Others can be implemented quickly, but something like the 24-hour economy, for instance, requires security measures and an enabling environment. You can’t rush it, it has to be properly structured,” he emphasized.

The economist also emphasized the importance of creating jobs through private sector growth to tackle unemployment.

“The government should find a way to make sure the private sector thrives, by creating jobs so that unemployment can be solved,” he concluded.

According to the think tank, that’s the major step in avoiding the perennial depreciation of the cedi.

It pointed out that the additional reserves could be derived from natural resources through increased ownership and value addition.

In an analysis ahead of the December elections, the IEA said the exchange rate management should be improved by implementing measures to address the perennial foreign exchange supply-demand imbalance through some of the structural reforms.

This includes better management of the exchange rate through prudent fiscal and monetary policies.

Infrastructure remains inadequate, poor

On infrastructure, it said Ghana’s infrastructure remains inadequate and poor, belying its status as a middle-income country.

Urban roads, highways and rural roads are all poor, while railways for transportation of people and goods are virtually nonexistent. Port facilities are also inadequate and below international standards.

The IEA expressed concern that the government budgets consistently make inadequate allocations to infrastructure, with disproportionate shares going to non-productive recurrent expenditure.

Again, inadequate and poor infrastructure has increased the cost of doing business and economic inefficiencies and has been a drag on economic growth.

On recommendation, it stated that the budgetary allocations for infrastructure should be substantially increased, while at the same time reducing recurrent expenditure.

At the same time, the private sector should be involved in infrastructure financing through Public-Private Partnerships (PPP) initiatives to reduce the burden on the budget, whilst tThe Ghana Infrastructure Investment Fund (GIIF) should be regularly funded to ensure dedicated funding for infrastructure.

Also, an additional Fiscal Rule should be introduced in the Fiscal Responsibility Act to channel all government loans to capital investment to ensure that enough returns are generated to facilitate future repayments.

Source: Joy Business  

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The Ghanaian currency has been on a rapid depreciation trend since February 2024, mainly due to sustained corporate forex demand pressures.

Despite this, significant indicators suggest an improving macroeconomic landscape in Ghana. Projections indicate a slight uptick in GDP growth from 2.9% in 2023 to 3.3% by the end of 2024, with average inflation expected to drop from 38% in 2023 to 18% in 2024.

To bolster the local currency, the Central Bank recently intervened by selling US$13 million in the spot market and an additional $20 million to Bulk Oil Distribution Companies (BDCs) during the 51st auction.

Nonetheless, the cedi experienced depreciation against major trading currencies in the first quarter of 2024, albeit at reduced rates compared to previous years.

Courage Boti, GCB Capital’s lead researcher, sees recent developments as a reason for hope regarding the cedi’s stability in the near term.

He cites the improving macroeconomic conditions and the potential for increased absorption of forex demand through Bank of Ghana’s auctions as key factors contributing to this optimism.

“In my engagement with the traders, what they see is a pile-up of demands from the corporate sector, largely the BDCs, who are just about more or less 20% of the IFAX needs from the BDCs auction that the Bank of Ghana conducts every fortnight. So, they source the rest from the open markets and also from the other corporate sectors. You could immediately think about things like the seasonal trends that we know from before; dividends repatriation in the second quarter.”

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This, the World Bank says may occur if efforts are not directed at controlling the country’s current account deficit to a sustainable level.

The caution was captured in the World Bank’s latest Global Economic Prospects report.

“Large current account deficits are likely to keep currencies under pressure in several countries, adding to inflation and external vulnerabilities (Gambia, Ghana)”, the report said.

The report encouraged government to take extra measures to manage its current account deficit for 3023.

It further pointed out the need to institute policies that will boost exports to check the current account deficit, while controlling imports.

It stated that introducing these actions together with policies aimed at checking inflation in the coming months will help in stabilising the economy and deal with some of the threats that will impact negatively on the local currency.

 Cedi recent performance

The Ghana cedi was on January 10, 2023, selling at ¢12 to the US dollar in the retail or forex market, following days of sustained stability.

This was about 0.86% loss in value since the beginning of the year.

The Bank of Ghana, however, quoted a dollar for ¢9.00 on the interbank forex market.

Checks by Joy Business at some forex bureaus at the time indicated that the pound was the major currency that had lost more value so far in 2023. One pound was going for ¢14.20.

The euro had also depreciated by a little over 1%, trading at ¢12.50.