Government has said that its “hands are tied,” at least for now, as traders and businesses fail to respond to the Cedi’s appreciation against the major trading currencies, especially the dollar.
The Cedi saw about 40% depreciation against the dollar and other currencies, a situation which forced traders to increase prices of goods and services which also increased the cost of living for Ghanaians.
This is because most of those goods were imported so they needed more cedis to buy the dollar and this affected the pricing.
[contextly_sidebar id=”tMbpxzrkejfBsY5JqJesSceoNY7dXDAC”]The cedi has however experienced some level of stability these past weeks and in some cases, slight appreciation against some of the major trading currencies.
On Tuesday, on the inter-bank foreign exchange market, the Cedi was at GHC 3.19 pesewes while at forex bureaus, the rate of the Cedi was GHC 3.80peswes.
Despite the stability, it appears some shop owners are yet to experience the impact.
A trader who spoke on condition of anonymity said “ we are yet to feel the impact… we have already imported the goods but until the old stock are finished , we cannot review the prices”
Another trader stated that “we have already ordered for most of the goods and we have to sell it at the same price, we can’t reduce it now and people will come and tell us the cedi is coming down so we should reduce it, we can’t because we bought them at a very high price”
“We’ve spent so much that we cant just reduce it out of the blues like that” another trader told Citi News.
The Deputy Minister for Finance, Mrs. Mornah Quartey said it will take some time for traders to respond to the Cedi’s appreciation.
Speaking on the issue, Mrs Quartey explained that it will take some time for traders and other SMEs to adhere to the strengthening of the cedi and effect changes in the prices at which their goods are sold for.
“…in economics and even in the market and the real world whenever something happens, it takes some time before the effect is felt so there is a timeline…for the SMEs there will be a time lag before the effect will show.”
What fueled Cedi’s stability and appreciation
1. Ghana’s recent $1 billion eurobond issue has injected an additional foreign exchange into the system which will eventually enable the country to resolve some of its dollar shortage issues.
Mrs. Quartey explained that “we[Ghana] had the Eurobond issue which has brought some dollars into the system. Now just knowing that will come also took the panic out of the market and created an easy pack for the Cedi.”
2. Another factor which contributed to the cedi appreciation, according to her, is the 1.7 billion cocoa facility
3. Ghana’s engagement with the International Monetary Fund (IMF) over a bailout has also brought some level of confidence in the market and helped the Cedi to appreciate.
4. The Bank of Ghana’s decision to reverse some of its policies on the foreign exchange also accounted for the stability.
The History
The BoG had earlier directed in February, this year, that all local transactions should be made in the local currency to stop the cedi from further depreciating.
A week before the directive was given, one dollar was bought at GH¢2.50 and sold for GH¢2.60; One pound was bought at GH¢4.50, and sold for GH¢ 4.60, while one euro was bought at GH¢ 3.70, and sold for GH¢3.80.
However, while the directive was in force, the Ghana Cedi’s situation worsened as it fell by up to 40 per cent within the first half of the year.
Many have blamed the Bank of Ghana boss for the decline of the Cedi while some have also asked the Governer of the Bank of Ghana, Dr. Kofi Wampah to resign but he has maintained that the cedi is not doing as poorly as many claim.
Some have also suggested that the cedi should be scrapped as a legal tender but a currency analyst with Gold Coast Investments Limited, Sammy Kofi Ampah has said it will be premature for government to consider scrapping the Ghana cedi as a legal tender for the nation.
Click on audio below listen to Mrs. Mornah Quartey
By: Marian Efe Ansah/citifmonline.com/Ghana