$600m IMF Cash Delay: Ghana risks speculators betting against the Cedi – Dr Theo Acheampong
Petroleum Economist and Political Risk Analyst, Dr Theo Acheampong, has averred that failure on the part of the Government to secure the $600m IMF second tranche by the second week, or worst case scenario third week of January, will lead to currency speculators betting against the cedi.
This, he noted, will result in a significant depreciation of the local currency leading to a hike and reversal of the country’s falling inflation rate.
Speculation activities against the cedi, he further noted, will necessitate the use of the country’s foreign reserves to protect and shore up the value of the cedi thereby causing the country to lose more of its already low foreign reserves.
According to him, the Government must do everything in its power to ensure it secures the needed agreements with China and other members of the OCC and ensure the disbursement of the second tranche by the IMF.
“It is important we get the second tranche, as every first quarter of the year we get multinationals repatriating their profits and if the money delays, it adds to uncertainty and the depreciation of the cedi.
“So the onus lies on the Government to push through the negotiations to get the necessary agreements and get the deal so as to avoid a depreciation of the cedi.
“Because not getting the second tranche will give speculators the chance to engage in speculative activities and bet against the cedi and we will have to use our foreign reserves to protect the cedi. And by doing so we will have burned through our reserves before the $600m comes in,” he posited.
Dr Acheampong made the above assertions speaking on the NorvanReports and Economic Governance Platform (EGP) X Space on the topic, “Ghana’s Second $600m IMF Cash; A Mirage or Reality.”
According to the Bank of Ghana, the Ghana cedi in the interbank market as at October 2023, depreciated by 25.4 percent, 26.0 percent and 24.7 percent against the US dollar, the pound sterling, and the euro, respectively, on a year-to-date basis.
This is against a depreciation of 53.8 percent, 45.7 percent and 46.9 percent against the US dollar, the pound sterling and the euro, respectively, during the same period in 2022.
The apex bank, however, notes that the cedi has been very stable since February 2023 on a year-to-date basis.
The International Monetary Fund (IMF) has rescheduled its board meeting to consider Ghana’s second review under the Fund programme and the disbursement of the second tranche of $600 million to January 11, 2024.
The IMF Board was expected to meet on Ghana’s programme for the second review in November 2023 and subsequently in the first week of December 2023 and December 21, 2023.
