Economist warns of further depreciation in cedi
The local currency is expected to experience further depreciation in the remaining months of the year.
The expected depreciation of the cedi against the greenback follows a recent period of weakening of the local currency.
The cedi begun the year 2021 trading at Ghs 5.76 pesewas to the dollar continuing its stability into the middle of the year with no depreciation recorded even as of June 2021.
The cedi, however, started depreciating against the dollar in July and August as the local currency lost almost 2 percent of its value due to factors like the rising level of imports among others which put pressure on the local currency.
Speaking on the year-to-date performance of the cedi against the dollar, economist with investment firm, Databank, noted that he expects further modest depreciation in the cedi in the coming months.
“Looking at the amount of pressure on the currency already and looking at the size of the external factors for Ghana until the end of the year, we see scope for some more depreciation, albeit modest depreciation before the end of the year. So from where we are it would not be out of place to see the Cedi recording some more depreciation.”
“First of all if you look at the fact that by the end of this year we still expect to record a current account deficit in the region of 3%, and we still are looking at an inflation rate although in single digit this year, but above 8 percent. These indicators show that there is scope for the depreciation of the Cedi beyond where we are today,” he stated.
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Meanwhile, a move by the Bank of Ghana to increase the amount of dollars on offer in its forward auction to $75 million last week, was not enough to arrest the cedi’s decline.
The cedi has been under pressure as a result of increased demand for the greenback amid a broader uptick in business activity as the economy recovers from the Covid-19 pandemic.
The Cedi on Monday depreciated further sliding to just under 6.04 to the dollar from 6.02 at last Friday’s close, reaching its weakest level against the dollar in 12 months.
