Cedi stability is hinged on a reduction in deficit – Economist

Business News of Wednesday, 25 February 2015

Source: Tv3network.com

Seth Terkper Finance Min

A Senior Lecturer at the Economics Department of the University of Ghana, Dr. Albert Laryea says until government reduces the country’s deficit and remain competitive as an economy, there will be no exchange rate stability.

Dr. Laryea was reacting to expectations for the Ghana cedi ahead of the President’s state of the nation address.

The cedi in 2014 depreciated by about 30 percent in a streak of poor performance that started as early as the first quarter. President Mahama had mentioned that persons with excess cedis converted them into dollars and deposited them in their foreign exchange accounts.

Forex measures announced by the Bank of Ghana in response to the depreciation of the cedi created some concern among the business and the investment community.

Proceeds from the cocoa loan syndicate as well as the issuance of the Eurobond which gave a combined yield of US$3billion later stemmed the fall of the local currency.

With the cedi’s fluctuating nature within the third and fourth quarters, the proceeds pushed some recovery into the system

Then the cedi gained some stability. Economists like Dr. Laryea are hoping to hear more measures to curb the cedis fall. Others believe financing the country’s deficit is the surest way to gain exchange rate stability. Meanwhile, the central bank is hopeful an IMF bailout programme will bring some stability to the cedi.