Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has asserted that the cedi will remain relatively stable against the dollar in 2021.
According to him, the stability of the cedi against the dollar next year aside the frequent forex market interventions by the Bank, will also be determined by the BoG’s plan to build up it’s reserves by an additional $300 million.
Additionally, dollar inflows from the $3 billion Eurobond issuance – or $5 billion if market conditions prove favourable – will help in making the cedi stable next year.
“We are building additional reserves of $300 million to support a stable exchange rate in 2021, this is in addition to the $3 billion Eurobond issuance next year. We believe these wil all help to have a stable cedi in 2021,” he stated at the 97th Monetary Policy Committee (MPC) press briefing on Monday.
The Bank’s gross foreign reserves currently stands at some $8.6 billion.
The cedi has this year performed remarkably well against the greenback as it’s year-to-date (YTD) depreciation rate stands at only 3.1 per cent.
This compares favourably to same period last year when the cedi’s depreciation rate was 12.8 per cent.
Meanwhile, the cedi also depreciated by some 3.1 per cent and 8.1 per cent against the British Pounds and Euro respectively.
Speaking further, Dr Ernest Addison explained that the Committee’s decision to maintain the policy rate at 14.5 per cent for the fifth time was due to reduced inflationary pressures coupled with generally improved macroeconomic conditions.
“Global conditions continue to be supportive, domestic inflation is easing, growth prospects are improving, crude oil prices have stabilized, monetary aggregates have expanded but with minimal impact on inflation, the current account deficit is stable, remittances inflow has remained firm, the exchange rate has been stable and reserve buffers continue to remain strong. Under the circumstances, the Committee’s decided to maintain the policy rate at 14.5 percent,” he stated.
In addition, the Governor noted the 14.5 per cent policy rate is to aid the Government meet its financing needs from investors.
“Government has a huge budget financing needs and a reduction in the policy rate will be a disincentive for investors who want to buy Government bonds to enable Government finance it’s expenditure, so this is not the time for a reduction in the policy rate [sic],” he stated.
