7 June 2018

Ghana: Depreciation of Cedi Temporal - BoG

The Bank of Ghana (BoG) has assured that the recent blip in the foreign exchange market that saw slight depreciation of the cedi against the dollar is temporal.

The BoG says the current situation is reflection of a spillover from external developments.

Mr Steve Opata, Director, Financial Markets Department in an interview said changes in global financing conditions due to rising oil prices and hikes in US interest rates is being transmitted to frontier market economies in Sub-Saharan Africa.

He said Ghana is in a strong position to overcome the exchange rate volatility due to strong economic fundamentals and excellent external payments position.

He said the bank has adequate reserves to take care of the situation adding that "Ghanaians and participants in the market don't have worry."

From the week beginning May 21, the local currency had been under pressure, in particular the cedi against the dollar.

The cedi opened on the interbank market on Wednesday at GH¢4.43 to the dollar while the forex bureaux are selling at GH¢4.64 to the dollar.

"In the case of Ghana, we strongly believe that staying on track with government's fiscal consolidation plan, the strong trade surplus, narrowing current account balances, significant build-up in international reserves (now standing at US$8.1 billion and 4.4 months of imports cover), and declining inflation rates, should moderate this impact," he said.

The external developments Mr Opata said have also coincided with domestic market reaction to the MTN Ghana lPO that was launched on May 29.

On fears that the proceeds from the MTN share sales could impact negatively on the exchange rate when the company decides to pay off its external shareholders in dollars, Mr Opata said the BoG had received assurances from management of MTN that there were no immediate plans to externalise the payments.

"The BoG is engaging the management of MTN Ghana to ensure that any FX outflows arising from this transaction is done in a phased and orderly manner," he said.

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