Cedi’s fate in IMF hands

Business News of Monday, 9 February 2015

Source: B&FT

Ghana Cedis 19Nov2010

Managing Director of Societe Generale Ghana, Gilbert Hie, has said stability of the cedi in the short-, medium-, and long-term depends on government signing the financial assistance agreement with the International Monetary Fund (IMF) as soon as possible.

“It is clear that the stability of currency in Ghana in the current economic and financial environment will depend very much on whether the IMF is coming or not. If the IMF doesn’t come there is a clear risk that the currency will depreciate again, because the fundamental and commercial balances in the budget are not there,” he noted.

The currency has remained relatively stable since the last quarter of 2014 into the new-year. Last week, however, the cedi went down by 2 percent from its level at the start of 2015 when it traded at GH¢3.26 to a dollar.

But the central bank says it is ready to “vigorously” intervene to ensure a much more stable currency in 2015.

Mr. Hie added that the fundamentals of the economy have deteriorated over the last two years and Ghana needs big and cheap money — and only the IMF can provide that.

He noted that the level of debt in the country has been increasing over the last two years. “If Ghana is not getting cheap money from IMF it will be very difficult to service the debt. The cedi’s stability depends on IMF.”

Lauding the IMF further, Mr. Hie said the IMF programme is important because it will provide Ghana with the necessary resources for a period long enough to restructure the budget and strengthen the commercial balance; and “we believe after two years the situation will improve and Ghana will get stronger out of this experience. But it needs a few years”.

President John Mahama recently stated that he is highly confident Ghana will seal a financial assistance deal with the International Monetary Fund (IMF) by the end of March, after several promises that the deal was to be sealed this month.

“Ghana is committed to securing an IMF programme, and we are confident that we will reach agreement with the IMF by the end of this quarter,” he said.

The research wing of Standard Chartered Bank responsible for Africa has predicted that the cedi will depreciate to GH¢4.20 against the dollar by the end of year. But the report, authored by the bank’s head of Africa research, Razia Khan, maintains that prediction could be revised if Ghana secures a programme with the IMF.

She also notes that an IMF programme will be key to maintaining investor confidence in the economy going forward.

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