The Bank of Ghana is optimistic the pressure on the cedi will ease soon and gain value on the back of the imminent Eurobond issuance and the cocoa syndicated loan, which are expected to yield a combined US$3 billion to the economy.
Since January this year, the Cedi has depreciated by about 26% against dollar, earning the tag as Africa’s worst-performing currency in 2014.
On a daily basis, the Cedi depreciates by about 0.3% on average and the relentless slide continues to hurt the economy and households, with destabilising effects on government’s fiscal plans.
So far, the depreciation of the cedi has led to a slump in imports and the rise in utility tariffs as well as petroleum and transportation costs, which the Central Bank contends have all raise inflationary concerns.
Dr. Kofi Wampah, who heads the Central Bank, has noted that despite a respite in the depreciation of the Cedi, there exists an enormous pressure on the local currency, which has become a growing concern to managers of the economy.
“Pressures on the local currency are still persisting although we have observed some moderation in the pace of depreciation on a month-on-month basis.
“The pressures are of major concern due to the adverse consequences of the depreciating currency on the economy.
“In the outlook however, we anticipate that the proceeds from the cocoa syndicated loan and the Eurobond issuance, estimated at almost US$3 billion, would provide significant support for the market in the second half of the year,” he said.
Currently, the government is readying to issue its third Eurobond worth US$1 billion for 10 years to mainly refinance maturing debts and other interest payments.
On the other hand, the cocoa syndicated loan is borrowed annually from abroad by Cocobod to purchase beans at the start of each harvest season, will also shore-up the cedi.
Heads of some banking institutions have told the B&FT that they expect the imminent arrival of Cocobod’s US$1.8billion syndicated loan to boost forex supply and stabilise the currency.
“When that money comes in, it will help arrest the situation to some extent,” Samuel Ashitey Adjei, Managing Director of Ecobank, said.
“We are talking about demand and supply, so if the supply side improves then it will help stabilise the currency.”