Aiming to stem its year-old currency spiral, Ghana’s central bank has taken a series of measures over the past two months, including a crackdown by security officers on allegedly barren black market vendors. license on the streets of Accra. But the monetary supervisor may have to scrutinize their own stock to understand the precarious state of the cedi.
In August, the Bank of Ghana said it would buy dollars from mining and oil companies that repatriate yields back to the country. The bank has chosen this initiative to increase the supply of dwindling foreign exchange to the economy, expecting an increase of up to $4 billion a year from effort.
The BoG has reportedly raised $84 million from the proceedings so far. But the move appears to compress the local currency market by exacerbating the cedi’s devaluation, according to JPMorgan, the investment bank. The cedi lost at least 52% to the dollar this year (as of Oct. 20) making it the worst of the 148 currencies tracked by Bloomberg.
JP extensionMorgan said the BoG’s decision to buy dollars from mining companies reduced the availability of foreign currency within the interbank market, according to local media quote the global firm: “To reduce volatility, we believe the BoG may need to use proceeds from its mining FX purchases to ramp up interventions or alternatively reverse FX buying.”
At present, the BoG is only able to offer $25 million at its auctions, against demand for $100 million.
Pressure is growing on the Ghanaian president’s key ally
Ghana is under pressure to reverse an economic slump that undoes recent gains that had seen the country ranked as one of the fastest growing markets in the world.
While discussions are ongoing about a $3 billion IMF bailout, groups within the country are pushing for other solutions. Last week, traders embarked on a three days of closure of the shops. This week, many members of parliament have asked president Nana Akufo-Addo a fire Finance Minister Ken Ofori-Attawho has held the position since 2017.