However, the rate of depreciation of the cedi slowed down in the last two months, after stern monetary actions from the Bank of Ghana coupled with some fiscal measures to halt the free fall in the first four months of 2022.

But the local currency ended June 2022 as the second most underperforming currency among 15 top currencies tracked by Databank Research.

The Bank of Ghana increased the policy rate by 2.5 percentage points to 17 per cent in March 2022. Again, it enforced measures such as the increase in the Cash Reserve Ratio to 12 per cent, the reset of the Capital Conservation Buffer to the pre-pandemic level of three per cent and increased the Capital Adequacy Ratio to 13 per cent.

This move was to encourage investors to invest in cedi-denominated assets, whilst inflation and money supply are effectively controlled.

The government through the Ministry of Finance also instituted fiscal measures to improve and balance the economy. This was to ensure the government was liquid all the time, whilst expenditure is effectively under control.

They include a 10 per cent additional reduction in discretionary spending, a 50 per cent cut in fuel coupon allocation for all political appointees and heads of government institutions,  suspension of all foreign travels except pre-approved statutory travels or critical travels, and the reduction of expenditure on all meetings and conferences by 50 per cent.

All these measures were intended to reassure investors that the government was committed to improving the fiscal economy through a reduction in the fiscal deficit and debt.

Currency Analyst, Courage Martey, told Joy Business that it was reassuring that the rate of depreciation of the cedi slowed down in the last two months.

“The cedi suffered one of its most difficult first six months of the year [2022], recording over 16 per cent depreciation on the Bank of Ghana interbank reference rate and over 20 per cent on the retail reference market, but it is noteworthy that over 90% of this depreciation happened during the first three months of the year”.

“So this means the pace of depreciation slowed down during the second quarter of the year. The slowdown was due to BoG’s tight monetary policy since March [2022]. It helped to cut the demand-side pressures in addition to the government announcement of expected syndicated loans to beef up the reserves.”

Mr Martey who is a Senior Currency Analyst at Databank Research, however, said the outlook of the cedi for the rest of the year was not so optimistic.  

“Overall it doesn’t look like an optimistic outlook for the cedi from this point, we will expect the BoG to have a firm grip on the supply side of the cedi,” he said.