The Ghana cedi has started recording some marginal appreciation against the dollar on the market.
Checks on the market show that on Thursday, March 14 the local currency did appreciate against the dollar by some 5 per cent to trade at around GH¢5.60 compared to about GH¢5.90 last Tuesday and Wednesday.
The local currency again went up marginally on Friday, March 15, 2019 closing at around GH¢5.56, based on JoyBusiness’ checks with some of the major banks in the forex business.
What has caused this sudden turn around for the cedi?
Based on JoyBusiness’ engagement with some treasurers and currency dealers and even persons close to the Bank of Ghana (BoG), the development has largely been influenced by the resumption of some injection of dollar cash by the BoG last week, which some market players describe as significant.
This was after the Bank of Ghana met the IMF’s program target which required it, to build dollar reserves up to a certain level for December 2018 ending date.
The BoG has now crossed the target.
Sources say the market and some investors appear to have bought the assurance from the Finance Minister, Ken Ofori-Atta that the cedis will stabilize in two weeks and coupled with the parliamentary approval of the $750 million bridge loan from Standard Chartered Bank.
This has resulted in some customers selling dollars. All these development would increase dollar supply onto the market and this could help stabilize the cedi in the short term.
Is this sustainable?
That has been a million dollar question most market watchers are struggling to answer.
Some have argued that looking at the pickup in dollar supply from the Bank of Ghana and other expected inflows, then it is likely that the development that we have witnessed could continue for a while. However, the structural issues facing the country which increase the amount of dollar demand by businesses and individuals.
This has contributed to the perennial depreciation in the last quarter of 2018 and the first quarter of 2019.
Some analysts have argued that, if that problem is not addressed then the challenge would persist and may not end soon.