The Bank of Ghana (BoG) says it will add a minimum of $800 million to the country’s reserves this month to stabilise the cedi against major international currencies, especially the dollar.
The Head of Financial Markets at the central bank, Mr Steven Opata, told the Daily Graphic that the accumulation of more dollars would help increase the net international reserve (NIR) to around $4 billion, enough to provide confidence in the system and help stabilise the free fall of the local currency.
Since January this year, data from the central bank show that the cedi has lost some 3.6 per cent of its value to the US dollar as the international investor community sold some of their investments in local securities and moved their funds overseas, partly causing the cedi to slide.
That caused some apprehension among the business community, prompting various private sector associations to urge the central bank to find a solution to the depreciation to help abate the impact on their operations.
Cause of depreciation
He explained that BoG research indicated that the recent depreciation would normalise in days, as it was not caused by weak fundamentals and external shocks but by local sentiments that tended to correct with time.
“In this first quarter, the movement in the cedi is not caused by external factors because the external sector has been quiet,” he said, citing recent signals by the Federal Reserve (Fed) of the United States of America that it would be increasing its rates, a situation that usually negatively affected the currencies of emerging and frontier markets such as Ghana.
Last year, the BoG blamed the cedi’s increased vulnerabilities on hikes in Fed rates, which it said reduced non-resident investor appetite in government bonds, causing them to repatriate their coupons and maturities in ways that posed shocks to the local currency.
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