The local currency is projected to depreciate between 3 per cent and 6 per cent this year.
This is according to senior economist with Databank, Courage Martey.
The relatively low depreciation rate projection when compared to 2019’s 12 per cent depreciation – but slightly higher when compared to 2020’s 3.9 per cent depreciation rate – is on the back of renewed inflows of foreign portfolio investments coupled with the Bank of Ghana’s (BoG) forex forward auctions.
The issuance of the $3 billion Eurobond in February 2020, coupled with the implementation of effective measures by the Bank of Ghana such as its forex forward auctions, and other factors such as a weakening US dollar is believed to have ensured that the local currency remained stable throughout 2020.
The stability trend of the cedi has continued into 2021, with the cedi experiencing no depreciation in the first 5 weeks of this year.
Explaining the basis for the projected cedi depreciation rate, Mr Martey stated that, “The impressive performance of the Cedi so far this year is largely supported by the renewed inflow of foreign portfolio investment as foreign investors seek to exploit opportunities on our fixed income market or on our capital market because of our high interest rates but low currency depreciation that we’ve experienced in recent times. And that provides opportunities to scoop some dollar adjusted returns from our domestic market.”
“The Central Bank has also been on the market quite heavy especially on the forward market where they signal and have actually been allocating $50 million per bi-weekly auction on the forward market.”
“That has not only been helpful with adding to the liquidity on the market but also in guiding exchange rate expectations so that people now form an expectation of how the exchange rate will behave from the BoG’s auctions. That among others leaves us with our forecast of 3 per cent to 6 per cent by the end of this year. We however see us hitting 4 per cent at the end of 2021,” he added.
