The local currency of Ghana faced a setback in its recent progress as it suffered a decline of 1.48 per cent. By the end of the previous week, it was trading at GH¢10.98 against the United States (US) dollar.
Initially, the market was optimistic, and this positive sentiment was attributed to the approval of a US$3 billion bailout program by the International Monetary Fund (IMF). However, an increase in the demand for foreign currency, especially for stronger currencies like the US dollar, created pressure on the local currency despite limited supply.
During a recent meeting of the Monetary Policy Committee, the Bank of Ghana made the decision to maintain its policy rate at 29.5 per cent.
This decision took into consideration various factors, including the easing of inflationary pressures witnessed in April. In April, inflation stood at 41.2 per cent, a decrease from 45 per cent in March and 52.8 per cent in February.
The relative stability of foreign exchange rates in recent weeks was also taken into account. However, despite these factors, projections indicate that the cedi will continue to face pressure due to the sudden surge in demand for foreign currency, particularly the US dollar.
The Executive Director of the Young Investors’ Network (YIN) Kofi Busia Kyei, has emphasized the significance of continuing debt ceiling debates in the US.
He observed that the feedback and unpredictability surrounding the negotiations had quickly erased the advances the cedi had achieved.
“The cedi continues to depreciate at a concerning rate,” he said.
The latest developments in the US, where senior authorities have tentatively agreed to suspend the federal government’s $31.4 trillion debt cap, have had a direct impact on the cedi’s performance. If a deal is reached and approved by the US Congress, it is anticipated that the depreciation of the cedi will get worse.
