Cedi depreciation started 20 years ago – Financial Analyst

Source: Daily Graphic
Date: 01-02-2014 Time: 06:02:49:pm

An expert in finance has called on regulators of the country’s economy, especially the Central Bank, to formulate time-tested policies to arrest the fall of the local currency.

“Dollarization is still going on,” Sammy Ampah, the Head of Research at the Gold Coast Securities Company, observed on TV3’s Midday Live on Friday, January 31, 2014.

He said the depreciation of the Cedi began a couple of decades ago and policies formulated by the regulators of the economy have failed to stem the tide.

“It is something that we have lived with,” he emphasized.

His remarks come in the wake of the Central Bank’s injection of $20 million into some “critical areas” of the Ghanaian economy to “save” the Cedi.

The measure is part of several others to be rolled out soon by the Bank of Ghana to stabilize the local currency.

“I believe this new set of measures and others to follow soon are transformational and will help revamp our interbank market and stabilise the local currency,” Dr Henry Kofi Wampah, the Governor of the Bank, told the Daily Graphic.

In 2012, when the Cedi depreciated by almost 20 per cent, the BoG, then headed by now Vice-President Paa Kwesi Amissah-Arthur, increased interest rates, limited the net open positions of local banks in currency trading, introduced new 30, 60 and 270-day government bonds to mop up liquidity, restricted local banks from holding nine per cent reserves against non-cedi deposits in foreign exchange and instructed a 100 per cent local Ghana Cedi cover for all bank vostro accounts.

Those measures temporarily halted the decline of the Cedi, which was seen as a bold attempt to stem exchange rate fluctuations.

The new Ghana Cedi was introduced on July 3, 2007 after four zeros were knocked off, making it the highest-valued currency unit issued by any sovereign country in Africa in 2007.

At that time, US$1 was sold at GH¢0.91.

In December 2008, US$1 was sold at GH¢1.10.

In June 2009, US$1 was sold at GH¢1.40; in December 2010 it sold at GH¢1.47 and in December 2011 it sold at GH¢1.64

At the beginning of 2013, US$1 was exchanged at GH¢1.88 and ended the year at GH¢2.16, a 15 per cent decline, according to statistics by the Ghana Stock Exchange (GSE).