Some analysts are pessimistic about the performance of the local currency – Ghana cedi – against major foreign currencies from February, this year onwards.
According to Courage Kingsley Martey, an economic analyst at Databank, the cedi could end the year between GH¢4.7 and GH¢5.1 to a US dollar.
In 2015, he predicted that the Ghana cedi would end the year at GH¢3.90 and it came close to GH¢3.80.
He said the cedi would depreciate against major currencies this year as a result of the usual lower inflows in foreign exchange and a high demand for foreign currencies.
Mr Martey said the cedi has been a bit stable in January, this year due to revenue inflows recorded from foreign debt instruments.
“The cedi experienced stability in the last quarter of 2015 mainly because of some inflows accrued from foreign debt instruments. As a result, the country closed the year with reserves significantly above three months import cover,” he said.
“Due to this, the cedi maintained its stability in January. As we enter February, sustainability of the exchange rate stability would be tested by the re-emergence of the seasonal pressures and elevated external risks.”
He stated that in the first half of 2016, the cedi may quickly depreciate against major foreign currencies due to pressures of repayment and increased demand, adding that the latter half would witness a less dramatic depreciation.
He noted that the prices of two of Ghana’s main sources of foreign exchange – crude oil and gold – were not too good currently and that their improvement would largely depend on monetary policy decisions of the monetary policy of the United States.
With this year being an election year, a rise in inflation, higher liquidity and a steep depreciation of the cedi are likely to occur.
By Samuel Boadi