Governor of the Central Bank, Dr Ernest Addison, has admitted to popular assertions that the Covid-19 pandemic has contributed to the strong performance of the cedi against the dollar.
He made the admission during the 97th Monetary Policy Committee (MPC) press briefing after announcing the Committee’s decision to maintain the policy rate at 14.5 per cent for the fifth consecutive time.
According to Dr Addison, the decline in imports due to border closures around the world on the back of the outbreak of the pandemic had contributed to less pressure in the demand for the greenback by importers.
“Yes, aside the Bank’s strong foreign reserves and frequent forex market interventions by the Bank, you can say less imports into the country which means less demand for the dollar has contributed to the performance of the cedi against the dollar because but for Covid, demand for the dollar would have have been high and which would have increased the depreciation rate [sic],” he stated.
The cedi’s sterling performance against the dollar this year, some analysts have argued, is as a result of the Central Bank’s intervention in the forex market with its weekly forward and spot auctions, coupled with a strong foreign reserve position and diversified exports.
Other analysts have also noted that the Covid-19 pandemic and the political uncertainty prior to the US elections aided the cedi’s performance.
Total imports for end-December 2019 according to the November 2020 Economic and Financial Data Report from the Central Bank stood at $13.4 billion but quickly shrunk to a little over $3 billion in the wake of the pandemic due to the nation’s borders closure as well as a cut in global supply chains.
However, since March this year, imports have been rising steadily on the back of restrictions easing in the country as well as in most countries across the globe.
The year-to-date (YTD) cedi depreciation against the greenback according to the Bank of Ghana is 3.1 per cent.
The depreciation rate compared to same period last year – November 2019 – was 12.8 per cent.
The 3.1 per cent depreciation is a marginal increase of 0.4 per cent from 2.7 per cent in August this year.
