By Elorm Desewu
The Ghana cedi would soon rebound after it has experienced some level of depreciation during the first half of this year due to government’s decision not to issue Eurobonds this year.
The Bank of Ghana has banked it hopes on the recent US$750million loan from African Export-Import Bank (Afreximbank) as well as this year’s cocoa loan syndication to build it reserves which currently stands at US$7.6 billion representing 3.4months import cover according to BoG’s latest economic and financial data report released last week and also stabilize the currency.
The local currency has depreciated by about 18.89% to the dollar on the interbank market and 26% on the retail market.
Senior Economic and Currency Analyst, Courage Martey explained that market participants are not confident of the market outlook.
He is therefore calling for new ways to cushion the country’s foreign reserves.
“The cedi’s problem is idiosyncratic because of the fixation of regular Eurobond inflow’s which is now missing today. And the kind of the withdrawal symptom from the Eurobond market is really squeezing the cedi hard and the market is really not comfortable with the level of reserves [Ghana’s foreign reserves] they are seeing.”
Furthermore, he said “in recent weeks or so, you’d also agree that there has been negative noise around the level of reserves that we have. And that also plays into the psychology of the market in a negative way and the cedi is really under serious selling pressure”
Mr. Martey continued, saying, despite the approval of the $750 million syndicated loan by Parliament yesterday, the outlook of the foreign exchange market is not encouraging.
“The good news is that yesterday parliament approved some $750 million, out of the $1.0 billion. However, the understanding is that it doesn’t fully resolve our total external financing means for the year [2022] and so the market doesn’t have that full confidence that the supply side or the gap between demand and supply is fully met with this approval”.
So that limited supply without options to beef up the reserve right now is really playing
