Latest figures by the Bank of Ghana have shown that the cedi’s depreciation against the dollar for March 2017, is five times more than the rate of depreciation recorded in the same period in 2016.
The cedi has depreciated from 0.9 to 5 percent within the twelve months period.
Also, in March 2017, the local currency depreciated by 7.5 and 8 percent to the British Pound and the Euro respectively.
According to the Summary of Economic and Financial data by the Bank of Ghana, the cedi has cumulatively gained 59 pesewas between March 2016 and March 2017.
A dollar traded at 4 cedis 42 pesewas as at the 23rd of March 2017, compared to 3 cedis 83 pesewas in March 2016.
Also, the cedi’s depreciation in relation to the Euro, has almost doubled from 4.5 to 8 percent between March 2016 and March 2017.
Cumulatively, the cedi gained some 42 pesewas within the twelve months period.
Even though the cedi’s performance in relation to the British Pound showed almost no change in price as at 23rdMarch, the local currency witnessed depreciation as much as 7.5 percent after appreciating by 1.8 percent in March 2016.
It is worth noting that aside the Euro, the cedi’s depreciation witnessed a marginal drop between February and March this year.
The sharp depreciation of the local currency between January and February this year occurred despite the Bank of Ghana’s 120 million dollars auction for the first quarter of this year.
Although the auction is expected to end by Friday, some currency analysts say it has just begun yielding the intended results.
The General Manager of Treasury at HFC Bank, Joseph Nketsia tells Citi Business News the sharp depreciation could have been averted had the central bank increased its supplies at the time.
“The dollar auction has really had a positive two weeks. At the initial stages, the demand for foreign currency was very high as a result, the 40 million dollars auction by the bank of Ghana wasn’t enough to absorb the demand on the market and that is what caused the cedi to depreciate further,”he said.
Notwithstanding the impact of the BoG’s 120 million dollars auction, a Senior Research Fellow at the Institute for Fiscal Studies, Dr. Said Boakye is opposed to the move.
He questions its sustainability and further warns that the central bank risks depleting its foreign reserve with the plan.
“Now the Bank of Ghana is not going to hold those reserves of foreign currency but rather going to keep on selling to the commercial banks and it is not necessarily increasing the supply within the system because it will be depleting what the central bank is having and entering into the hands of the commercial banks.”