The cedi demonstrated a rare performance to survive the seasonal first-quarter blues by losing only 1.4 percent of its value against the dollar as compared to 14.6 percent in the same period last year.
The local currency’s performance is a departure from previous years’ weak performance when the cedi gained notoriety for its consistent depreciation.
In the first quarter of 2014, the cedi depreciated by close to 18 percent in a year that saw the central bank introduce a raft of forex measures which were later repealed after a severe backlash from the public.
With Ghana going to the polls in November, some analysts feared government’s fiscal imprudence could translate into poor cedi performance amid poor forex inflows, especially due to lower prices for commodities.
The cedi has however has stood its ground, nearly eroding all gains the dollar has made since turn of the year.
At the beginning of the year, a dollar cost GH₵3.7823.
The local currency closed the quarter trading at GH₵3.8365 to a dollar, indicating a depreciation of a little above 1 percent.
Dr. Kofi Wampah, the immediate past-Governor of the central bank, was widely criticised for his inability to keep the cedi stable.
At one point, he was faced with a case at the Supreme Court in which a lawyer and banking lecturer, Dr. Ephraim Baiden, petitioned the court to force the Bank to stablise the cedi after bouts of depreciation that year.
The court in the following year dismissed the case, saying it does not have the power to tell the Bank how to manage the economy.
After presiding over a turbulent cedi, Dr. Wampah will be credited with steering the cedi out of the woods, with the period of stabilisation stretching as far back as second half of last year.
Credit ratings agency Fitch, in a report issued last month, also forecasted that the local currency will experience greater stability in 2016 and lower levels of depreciation.
The agency expects the cedi to trade at an average exchange rate of 4.1/US$; this would be a depreciation of about 8 percent compared with the 22 percent depreciation that the cedi experienced in the previous year.
Explaining the local unit’s stability, Dr. Wampah in his last Monetary Policy Committee address said the cedi’s performance reflects the central bank’s tight monetary policy stance, improved liquidity on the foreign exchange market, and renewed investor interest in domestic debt instruments.
“The Bank will continue to use appropriate measures to reduce exchange rate volatilities to support the disinflation process,” Dr. Wampah said days before he tended in his resignation — five months away from the end of his tenure.
In his absence, first Deputy-Governor of the Bank of Ghana, Millison Narh, will act in the position of Governor; and his immediate task will be to sustain the cedi’s stability beyond the November polls, if possible.
Source: