The Cedi depreciated at a much faster pace of 5.9 per cent in January 2012 compared to 1.9 per cent in January 2011 mainly on account of strong demand for foreign exchange and certain speculative activities.
The Governor of the Bank of Ghana (BoG), Paa Kwesi Amissah Arthur, delivering the Monetary Policy Committee (MPC) report for the last quarter of 2011 and its impact on current developments on Wednesday in Accra, said the cedi depreciated by 4.9 per cent against the US dollar in 2011, compared to 3.1 per cent in 2010.
“In trade-weighted terms, a real effective depreciation of 1.7 per cent was recorded, compared to 1.5 per cent in 2010.
According to him, the rapid growth in imports in 2011 and the unusual surge in demand for foreign exchange during the last quarter of the year created a misalignment in Bank of Ghana’s foreign exchange cash flow.
“Initially, this led to a marginal depreciation in the interbank rate as banks searched for resources to meet their customers’ requirements.
“Further pressure was placed on the exchange rate when foreign investors sought early redemption of their investments on the domestic bond market. The situation was further aggravated in January 2012 by speculative activities of dealers and traders. The pass-through to inflation expectations of developments in the foreign exchange market is obvious.”
Touching on interventions by the Central Bank to calm the market and restore stability, the Governor said the situation will be monitored closely, adding, “The bank is ready to take appropriate measures to stem potential threats to achieving the inflation target.”
Traders have complained about the repercussions of the depreciation of the cedi citing slow business and reduction in expected profits.
The importers noted that the development has taken a heavy toll on their businesses.
By Samuel Boadi