BoG: Efforts Afoot To Stabilise Cedi
– As festive season approaches
Story: Isaac AIDOO, Accra
THE Bank of Ghana (BoG) says efforts are afoot to stabilise the Ghana cedi, with renewed focus on boosting the country’s foreign exchange reserves as the festive season approaches.
Demand for foreign currency typically rises in the final quarter of every year, putting additional pressure on the cedi. Currently, the currency trades at nearly GHS 17 to the US dollar, marking a year-to-date depreciation of 24.3%.
The BoG’s strategy, as outlined by Governor Dr. Ernest Addison, emphasizes building reserves to counter exchange rate fluctuations, thereby fostering greater stability and reassurance for businesses and consumers.
At the beginning of 2024, the cedi showed some initial resilience following targeted interventions by the BoG in late 2023, trading at a stable rate of around GHS 13 to a dollar.
However, as global financial conditions tightened and external pressures on Ghana’s economy grew, the cedi experienced significant depreciation, with its value slipping amid heightened demand for foreign exchange, particularly for imports and external debt servicing.
The depreciation trend has underscored the BoG’s proactive approach to maintaining the currency’s stability through consistent policy intervention and reserve management.
In a recent address, Governor Addison acknowledged the growing economic pressures and concerns over exchange rate volatility but stressed the BoG’s commitment to bolstering reserves and supporting the local currency.
He explained that the bank’s current reserves stand at around $7 billion, a buffer that serves as a tool to stabilize the exchange rate in a balanced manner.
While the BoG could act swiftly to artificially drive the cedi to a lower rate, such as GHS 10 to the dollar, Addison cautioned that a more sustainable approach involves gradually building reserves to provide a more robust defense against external shocks.
The BoG’s measured strategy is not just aimed at immediate exchange rate relief but also at reinforcing investor confidence in Ghana’s financial markets. By maintaining a sizable reserve buffer, the BoG aims to strengthen the country’s economic position, thereby fostering a stable environment for both domestic and foreign investment.
This announcement was made at the launch of “The Concise Law of Banking,” a book authored by Afua Appiah-Adu, which serves as a practical guide on banking law and was commissioned by the Institute for Law & Development (ILAD).
The book’s topics—ranging from electronic payment systems to anti-money laundering — highlight the evolving dynamics in Ghana’s banking sector, a landscape closely intertwined with the broader economic stability that the BoG is striving to maintain.
As the BoG continues its stabilizing efforts, the central bank’s policies will likely focus on balancing immediate exchange rate needs with long-term fiscal health. This approach aims not only to stabilize the cedi but also to bolster economic resilience in the face of ongoing global financial uncertainties. With cautious optimism, the BoG’s policies are designed to restore confidence, support growth, and ultimately pave the way for a more stable and prosperous economic future in Ghana.
