The relative strong performance of the cedi this year has been largely attributed to the Bank of Ghana’s intervention in the forex market and diversified exports market, rather than a weaker US dollar.
Bloomberg reported that the dollar’s historical position as the global reserve currency is in jeopardy because of steps the U.S. has taken to save its economy during the Covid-19 pandemic.
But Currency Analyst, Courage Boti of Databank Research explains to Joy Business that multiplicity of factors have rather facilitated the stronger performance of the cedi compared to previous years. According to him, most countries dependent on oil have seen their external balances grow weaker during this COVID period, hence the plummet in their currencies.
Citing some African countries and comparing them to Ghana, he said Ghana is doing well.
“You see countries like Nigeria, their year-to-year has depreciated by close to 18 percent. The countries like South Africa at some point had depreciated by 23 percent. Currently Zambia is close to 30 percent depreciation against the USD”, he said.
“And you compare that to Ghana’s 2.93 percent depreciation, it tells you that the impact of diversification has been very great in this whole performance and you saw that in the half-year data Bank of Ghana put out there”, he further pointed out.
He emphasized that Ghana did relatively well though overall export was not great.
“Yes our overall [Ghana] export value is not as great, the growth is not as great and then import has reduced somewhat. It could have been worse but for the rally in gold prices and the increased volume for gold and cocoa”, said Mr. Boti
The cedi has since this year lost about 0.83% to the dollar on the retail market but depreciated by about 2.8% on the interbank market.
Comparing cedi to other SSA currencies
Ghana’s cedi is the eight best performing currency on the African continent despite starting the year as the best performing currency in the first two months.
It is, however, second in the ECOWAS sub-region, behind the CFA franc, among currencies tracked by joy Business.
The CFA franc, used by eight ECOWAS countries, is the best performing currency on the African continent with an appreciation of 5.69% against the US dollar .
It is followed by the Moroccan dirham (4.03%), Tunisian dinar (2.39%) and Egyptian pound (0.70%) which have all increased in value against the American currency year-to-date.
Based on the current trend, the cedi is expected to end 2020 with a year-to-date depreciation of less than 5.0%. This would be however better than the 8.33% loss over the same period last year.