Economist and University of Ghana finance professor, Prof Godfred Bokpin, has stated that the cedi may only experience temporary stabilization against major foreign currencies before continuing its decades-long trend of depreciation.
He attributed this ongoing depreciation to the absence of robust macroeconomic policy support for the cedi.
Speaking on Joy FM’s Super Morning Show on Monday, May 13, Prof Bokpin explained that the cedi has consistently depreciated since its introduction in July 1965.
While he expects occasional periods of relative stability, he emphasizes that the cedi is likely to continue depreciating, even with optimal economic measures in place.
“If we do everything right we will still expect that the cedi will depreciate by a certain margin given the relative strength of the economy.
“It’s a shame that we haven’t been able to provide the cedi with the necessary support through sound macroeconomics policy making, including responsible fiscal management and prudent monetary policy.
“As a result, we’ve denied the cedi some basic rights and then expect it to perform magic, when in reality, the cedi’s behaviour is a reflection of weak underlying fundamentals,” explained.
Professor Godfred Bokpin referenced Vice President Dr. Mahamudu Bawumia’s well-known remarks on the cedi’s depreciation, arguing that as long as the economy’s fundamentals remain weak, the exchange rate will continue to expose the currency.
He noted that in 1964, Ghana had an inflation rate of less than 1% and used the British West African pound as its currency, which limited its monetary control.
Even after gaining independence, Ghana faced challenges with currency printing until the introduction of the cedi in July 1965. However, inflation has been a persistent issue since then.
As of today, Monday, May 13, one US dollar averages GH¢14.5 according to Joy Business.
Analysts predict a continued weakening trend for the local currency due to significant disparities in foreign exchange demand and supply.
However, they expect improved liquidity conditions by the end of the second quarter of 2024, following the International Monetary Fund (IMF) board’s approval of the second review of Ghana’s programme.
This approval will lead to a tranche disbursement of US$360 million under the IMF programme.