BoG ready to intervene "vigorously" this year

Business News of Saturday, 31 January 2015

Source: Reuters

Dr Henry Kofi Wampah BoG

The central bank is ready to intervene “vigorously” this year to ensure a much more stable currency, a senior bank official said on Wednesday — the cedi having slumped 31 percent against the dollar in 2014. The currency, which has stabilised in the last four months, has come under renewed pressure in recent weeks on increased dollar demand by local traders. It traded at 3.2600 to the dollar on Wednesday, down 2 percent from its level at the start of 2015.

Yao Abalo, head of Treasury at Bank of Ghana, said the central bank views the current pressure on the cedi as seasonal and temporary, and has begun boosting liquidity support to calm market nerves.

“We have started increasing our support for the market and we will continue to do so vigorously this year, in addition to other plans to ease foreign exchange uncertainties,” he said. He did not give details of what those plans are.

Some analysts say the renewed pressure on the cedi is due to seasonal dollar-demand for first-quarter imports as well as speculative dollar-buying.

Abalo said the bank’s aim is to implement policies that ensure a more stable currency, making it unnecessary for people to hold excess dollars. “It should not matter whether you are holding dollars or cedis. We want to avoid what happened last year,” he said.

The cedi was hit last year by investor concerns about the government’s finances.

Ghana, which produces gold, cocoa and oil, is now in talks with the International Monetary Fund on an assistance package to stabilise its economy amid rising inflation, debt and fiscal slippages.

The central bank has not given a forecast for the cedi this year. However, market watchers predict the currency will decline by 10-15 percent against the dollar in 2015, buoyed relative to last year by a potential IMF programme.

Abalo said the key focus for the bank this year is to not only ensure a more stable currency, but also to pursue policies that boost investor confidence in the government’s efforts to fix its fiscal problems.