The Bank of Ghana (BoG) is in a weaker position to ensure that the cedi depreciates at predictable and sustainable rates against its foreign currencies, a retired Deputy Governor, Mr Emmanuel Asiedu-Mante, has observed.
This is because the bank has fewer options that it could employ to counter any steep fall in the value of the local currency against its foreign counterparts, particularly the US dollar, he told the GRAPHIC BUSINESS on April 16.
“The only tool that it (the central bank) has is to fall on reserves that the country has to be able to mitigate the impact of the rate,” Mr Asiedu-Mante, who retired in 2006, explained during the interview which discussed how the country could achieve a sustainable exchange rate to allow for businesses to plan effectively.
Unfortunately, he said people were unaware of this limitation and as a result “overestimate the influence of the central bank when it comes to the fight against currency depreciation”.
He said apart from the intermittent ‘pumping’ of foreign currencies into the market whenever there was a supply pressure, “the central bank is powerless”.
The Governor of BoG, Dr Ernest Addison, said in January this year that the central bank used some US$670 million to support the cedi in 2018. In that year, the currency lost about 8.39 per cent of its value to the US dollar.
Forum on depreciation
Mr Asiedu-Mante, who also sits on a number of boards of financial institutions, was speaking to the paper ahead of the GRAPHIC BUSINESS/Stanbic Bank Breakfast Meeting on the cedi depreciation.
This quarter’s edition of the breakfast meeting is scheduled to take place on April 23 at the plush Labadi Beach Hotel and will be graced by Dr Addison.
It will be on the theme: “Achieving Sustainable Exchange Rate Stability: Our Options”.
The quarterly meeting is one of the thought leadership initiatives of the GRAPHIC BUSINESS, Ghana’s most authoritative business and economic newspaper, and Stanbic Bank Ghana Limited, the country’s favourite commercial bank, to help stimulate intellectual discourse on pertinent issues affecting the country.
Some previous episodes had discussed how the country could maximise the gains of agriculture, ways to reinvigorate growth in the manufacturing subsector and the role of pensions in national development.
The April 23 forum comes weeks after the Minister of Finance, Mr Ken Ofori-Atta, revealed that he was ordered by President Nana Addo Dankwa Akufo-Addo to constitute a bi-partisan committee to find sustainable solutions to the perennial depreciation of the year.
It is, therefore, hoped that the meeting would start the conversation towards finding a lasting solution to the depreciation of the country’s currency.
In the first two months of this year, the cedi came under intense pressure from the supply side, resulting in it losing about 16 per cent of its value to the dollar.
The pressures emanated from foreign bondholders disinvesting from the domestic market at a time BoG was rebuilding reserves to meet the International Monetary Fund’s conditionality on net international reserves.
In a recent interview with Bloomberg TV, Dr Addison described the depreciation as “overshooting”, which he said had since corrected to reflect the current fundamentals of the economy.
Source: Daily Graphic