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The performance of the local currency is at new lows, as its depreciation since the beginning of the year ranks it among the worst performers in emerging markets.
According to the Bank of Ghana's interbank trade, as of February 1, the cedi had depreciated by 2.6% against the US dollar, compared to an increase of 0.1% in the same period last year. .
Last year, the cedi depreciated by 8.4% against the dollar, which the central bank attributes to the strengthening of the US dollar against emerging market currencies and other frontier markets.
According to the central bank, the cedi's performance against the greenback was better than that of emerging currencies such as the Indian rupee, the Turkish lira and the South African rand, among others, against the US dollar.
The performance of the local currency is at new lows, as its depreciation since the beginning of the year ranks it among the worst performers in emerging markets.
According to the Bank of Ghana's interbank trade, as of February 1, the cedi had depreciated by 2.6% against the US dollar, compared to an increase of 0.1% in the same period last year. .
Last year, the cedi depreciated by 8.4% against the dollar, which the central bank attributes to the strengthening of the US dollar against emerging market currencies and other frontier markets.
According to the central bank, the cedi's performance against the greenback was better than that of emerging currencies such as the Indian rupee, the Turkish lira and the South African rand, among others, against the US dollar.
The Turkish lira rose by 1.35%; the Indian rupee depreciated by 2.87%; with the Chinese yuan and the Argentine peso appreciating respectively to 1.98 and 1.13% against the dollar.
Judge the cedi
Dr Ernest Addison, governor of the central bank, told reporters last week, after the MPC meeting, that the cedi's performance could only be measured in the context of the situation in emerging and developing markets.
"Even though the cedi has depreciated by 8.4%, compared with developments in other emerging and frontier markets in 2018, the cedi is relatively well behaved. If you take Argentina, the peso has recorded a depreciation of more than 50%; Turkey, a depreciation of more than 28%; Russian ruble, 17 percent.
"This is the context in which we can judge the cedi's performance in 2018. Ghana's cedi performed relatively well," said the Governor, seeking to explain the performance of last year's cedi.
Nevertheless, last year's relatively stable performance came at a cost: the bank's international reserves were used up to prevent the cedi from continuing to fall.
According to the Central Bank's summary of economic and financial data, January 2019, Ghana's net international reserves rose from $ 4.5 billion in December 2017 to $ 3.85 billion a year later.
In explaining the decline, Governor Addison said, "You must make a judgment; a bit of reserve discount to save the currency. But you do not want to lose all your reserves by trying to save the currency. It is important not to undo all the gains we made last year.
"We spent two years reducing inflation from over 15% to 9.4%; if we allow exchange rates to change too quickly, we will reverse the progress we have made in terms of price stabilization. That is why we had to lose reserves to slow the rate of depreciation of the currency.
"But at the same time, you must be aware of the need to keep enough reserves to withstand new shocks. That's the balance the central bank had to use. "
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