Cedi anxiety stems from BoG’s handling of currency appreciation

Economist and lecturer at the University of Ghana Business School, Professor Patrick Asuming, has attributed the recent public anxiety over the stability of the cedi to the Bank of Ghana (BoG).

His comments follow assurances from the Governor of the Central Bank, Dr. Johnson Asiama, who dismissed concerns about the local currency and emphasized that the BoG has taken firm measures to safeguard macroeconomic stability.

Dr. Asiama noted that the Bank has sufficient foreign exchange reserves to support the cedi, especially as the country enters the final quarter of the year.

Reacting in an interview on Eyewitness News with Umaru Sanda Amadu on Wednesday, September 17, Prof. Asuming said that while the Governor’s assurance is justified, the central bank’s handling of the cedi’s appreciation earlier this year partly triggered the current anxiety.

“In terms of the central bank being in a position to support the cedi if it comes under extreme pressure, they are well-armed to be able to do that. So you understand why the Governor [BoG] is saying we have no reason to be anxious.

“But I think in some sense, much of it is being brought on by the way the central bank allowed the cedi to appreciate so quickly. Because to allow the currency to appreciate so quickly over a short period of time, when it was obvious that we couldn’t sustain holding the dollar at GHC10, is something that is really coming back to bite,” he said.

He explained that the recent depreciation is largely a correction, following what he described as an “unsustainable appreciation.”

Prof. Asuming also pointed out that international institutions such as the International Monetary Fund (IMF) and the World Bank had cautioned the BoG against excessive intervention in the foreign exchange market.

“The recent appreciation of the cedi we are seeing is more or less a correction, because the appreciation went too far. You would have read that the IMF and the World Bank have been cautioning the BoG to minimise the intervention.

“So, minimising that intervention and allowing the cedi to serve correctly is part of the reason why we’re seeing the depreciation. But this is controlled because the BoG is not going to allow it to depreciate quickly as we used to see. I think that is where the public should take that assurance,” he added.