Ghana: Ghanaian cedi weakens markedly, reversing last month's appreciation
August 18, 2015
In August, the Ghanaian cedi (GHS) weakened significantly against the U.S dollar, thus losing almost all of what it gained last month. On 13 August, the currency traded at 4.16 GHS per USD. The result was 18.71% weaker than on the same day of the previous month and 10.4% weaker on an annual basis. The currency has lost 30.5% of its value since the beginning of the year. The recent depreciation of the cedi underlines the trade imbalance in Ghana as the country’s imports exceed its exports markedly.
Last month, the cedi appreciated over 20.0% due to the Central Bank’s decision to clear the excess demand for U.S dollars in the exchange rate market as well as expectations of increased foreign inflows in the second half of the year. However, more recently, the cedi has been under pressure after China’s Central Banks decided to devaluate the yuan on 11 August. Ghana heavily relies on Chinese goods, which following the yuan devaluation will be cheaper to buy.
Earlier this month, the Central Bank communicated that the Monetary Policy Rate currently stands at 24.0%. The record-high level of the policy rate aims at containing soaring inflation. The Bank has also declared that the robust interbank intervention will continue in the future in a bid to support the weak currency.
Author: Dirina Mançellari, Senior Economist