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Bigger trouble awaits the Cedi in Oct-Dec- Analysts

I said it in the beginning of the  year that  the Cedi will likely hit GHC6 to the dollar. I still maintain that.

 

The  local currency, the Ghana Cedi is yet to see its worst performance for 2015. This is according to the Chief Executive officer of Dalex Finance, Ken Thompson.

Ken Thompson, in the beginning of the year 2015 projected that the Cedi will hit GHC6 to a dollar before the end of the year. That was before the Bank of Ghana took drastic measures to stem the fast decline of the Cedi in the first half of the year which saw he currency reduce from GHC4 to the dollar to GHC3.30.

This short respite notwithstanding, the currency has resumed its free fall in the third quarter of the year hitting close to GHC4.20.

Ken Thomson, in an interview with Pulse Business maintained that the Bank of Ghana's  daily injection of 20 million dollars into the market to stabilize the cedi against the dollar was not going to yield long enough results.

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" The cedi has a normal level based on demand and supply. So if you artificially induce the cedi's appreciation, it will float right back to where it belongs when the artificial method stops. And that's what we are seeing. I said it in the beginning of the  year that  the Cedi will likely hit to the dollar. I still maintain that. Something needs to be done."

Meanwhile, Head of the Banking and Finance Department of the University of Ghana Business School is projecting a worst performance of the Cedi in the last quarter of the year.  According to Dr. Godfred Bokpin, the Cedi has always had its worst decline in the last quarter of the year due to an escalation in import activity in the commercial sector.

" In the third quarter,  imports in the commercial sector increased tremendously due to the festive season. Importers have a huge demand for foreign goods they have to meet during this season, so naturally, demand for dollars will shoot up tremenduosly.", Dr. Bokpin told Pulse Business in an exclusive interview.

Another expert, Dr. Laud Mensah, lecturer of Banking and Finance at the University of Ghana, shares the same sentiments. In an exclusive interview with , the financial expert agreed with earlier assertions, that the cedi will drop drastically in the third and fourth quarters of the year as companies repatriate annual profits to their home countries and parent companies.

" All these multi- national companies in the country always repatriate annual profits and dividends outside the country. And that will certainly drive the demand of dollars higher. I don't think the exchange rate will hit GhC6  to a dollar, but it will certainly pass the Ghc5 mark.

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The head of the Banking and Finance department at the University of Ghana recommends that Government finds more practical and sustainable ways of dealing with the problem. " Government must be more creative.  Government can ask multinational companies to suspend repatriating  profits until the the Cedi problem. And that will be more sustainable.

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