The positive trend has been attributed to the intervention of the central bank, which is pumping about $20 million a day into the market as against the daily demand of $14 million.
The Ghana cedi has begun showing strong strength against the major foreign currencies such as the United States Dollar, the Euro and the British Pound in the last 10 days in what is expected to restore some renewed confidence in the Ghanaian economy.
The new phenomenon is also expected to help businesses in their forecasting.
The dollar which sold at GH¢ 4.32 at the end of June this year, fell to GH¢ 3.66 as of July 8 while the British Pound which was exchanged for GH¢ 6.81 is now going for GH¢ 5.62 during the same period under review. The Euro also dropped from GH¢ 4.84 on June 30 to GH¢ 4.05 as of July 8, this year, according to Bank of Ghana’s daily interbank forex rates.
This positive trend has been attributed to the intervention of the central bank, which is pumping about $20 million a day into the market as against the daily demand of $14 million.
The move has kicked in the basic theory of economics which relates to demand and supply and its dynamics which simply says that the more the demand the higher the price and the more the supply, the lesser the price.
Experts urge caution
In spite of the good news, players in the economy remain cautious in their comments on the new turn of events.
While some fear that the move is not sustainable in the long run, others are optimistic about the future.
The skeptics believe that the position taken by the central bank will force a depletion of the country’s foreign reserves and further worsen the economic situation.
But the optimists believe that with the expected inflows from the $1 billion Eurobond, the cocoa syndicated loan and the defreezing of funds from the country’s development partners the bank will replenish what it has lost.
The President of the Association of Ghana Industries (AGI), Mr Asare Agyei, in an interview with the Daily Graphic asked the central bank to sustain the efforts made to maintain the strength of the Ghana cedi.
According to him, the present situation would help businesses, particularly those that relied on imported raw materials to produce in the country, to predict and budget accordingly.
The Chief Executive Officer of the Private Enterprise Foundation (PEF), Nana Osei Bonsu, who spoke on a local radio station, also urged the central bank to keep the momentum by ensuring that the fall was not a temporary relief.
“We do not want the central bank to be complacent with what is happening now because the economy needs that help for businesses to survive,” he noted.
The Executive Directive of the Centre for Policy Analysis (CEPA), Dr Joe Abbey, for his part urged the government to consider the supply side of the entire economy to help the cedi regain its strength against the major currencies.
Meanwhile, the Monetary Policy Committee of the Bank of Ghana will hold its 65th regular meeting beginning July 13-15, 2015, to review developments in the economy.
The meeting will conclude with a press conference on July 15, 2015 to announce the decision of the MPC on the appropriate positioning of the bank’s policy rate.
The meeting is coming at a time when the cedi, until now, had suffered some major challenges that nearly crippled businesses that were already stressed by the ongoing load-shedding exercise.
From the events in the economy since the beginning of the year where the fiscals are showing some positive signs, businesses and analysts expect the committee to drop the policy rate from its present level of 22 per cent.
This, when done, will have an impact on the base rates of the commercial banks which hover at an average of 31 per cent and also affecting the treasury bill rates which also average 25 per cent.