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Cedi depreciation will continue but BoG’s measures may rescue situation in the long term – Jackson

A financial analyst, Mr Joe Jackson has called on stakeholders to minimize their expectations regarding the impact of the measures introduced by the Bank of Ghana (BoG) to control the fall of the Cedi.

In his view, the fall of the local currency will continue in the interim.

He however, expressed optimism that the measures introduced by the BoG will yield results in the long term.

The regulator in a statement called for calm as it has introduced measures to resolve the fall of the Cedi.

The BoG has identified five key reasons for the woes of the local currency.

These are “The strength of the US dollar, Investor reaction to Credit Rating Downgrade, Non-Roll over of Maturing Bonds, The sharp rise in crude oil prices and impact on the Oil Bill, Loss of External Financing.”

The measures introduced to resolve these, according to the BoG, are the “Gold Purchase Program to increase foreign exchange reserves; Special Foreign Exchange Auction for the Bulk Distribution Company’s (BDCs) to help with the importation of petroleum products; Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.

“The Bank of Ghana is supporting the banking sector with foreign currency liquidity to help meet the demand for external payments. The recently approved USD750,000,000 Afriexim loan facility by Parliament, once disbursed, will boost the foreign exchange position of the country and help restore confidence.

“The Cocoa Loan is expected in the last quarter of the year. This facility will also help provide more foreign currency to help address the cedi depreciation. In the short term, we expect that when the IMF programme is finalized, it will also go a long way to help restore confidence in the economy and drive portfolio flows.”

Speaking on the Ghana Tonight show on TV3 with Alfred Ocansey, Tuesday August 16, Mr Jackson said “First of all, we must understand that we have got to scale down our expectations.

“We are in a tough situation and these measures will keep us bottling out but they are not medium to long term solution, they will keep us from maybe having a major default in our obligations.

“The cedi may continue to depreciate and will not even recover what it was before. But I do sincerely believe that the syndicated loan of 750million followed by the cocoa loan and then the IMF support that will hopeful be signed in Q1 of next year will hopefully help to address the crisis we are in now.”

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