Governor of BoG explains the reason for the Cedi depreciation

Governor of BoG explains the reason for the Cedi depreciation

Dr. Ernest Addison - Governor, BoG

The Bank of Ghana’s (BoG) Governor, Dr Ernest Addison has ascribed the cedi’s depreciation to capital flight and the global economic impact of the COVID-19 pandemic.

Speaking in a live interview on Facebook, the Governor, Dr Addison revealed that the cedi has depreciated by less than two per cent in 2020.

In further explaining, he explained that the value of the cedi is reflecting in many factors which include domestic economy and developments in the global economy.

While answering a question regarding the falling of the cedi when imports and forex-oriented transactions remained low, he said:

 

"The cedi reflects many factors, It reflects our domestic economy. It reflects developments in the global economy and If you look at what has happened worldwide, we have seen capital leave jurisdictions such as ours into the advanced economies. Now, when that happens, it has an impact on the availability of dollars in Ghana and that can trigger a depreciation of the currency. Now, if you look at this year 2020, we started the year on a very strong note, with very strong reserves and then also we went very early to the capital markets to issue a three-million-dollar bond”, the Governor noted.

 

He continued to say that:

 

“So, by January and February, the cedi was appreciating. If you look at the data very carefully, the Ghana cedi appreciated for nearly two months of 2020 until the global shock came in terms of this COVID pandemic and then we saw capital flowing out of countries like ours and therefore the cedi also started losing value. And therefore, if you look at the year-to-date statistics you will see that the cedi this year has depreciated by less than 2 per cent because there has been quite a significant appreciation of the currency in the first two months of the year."

 

The Cedi’s performance

In February this year, a report from Bloomberg indicated that the cedi was the world’s best-performing currency against the dollar.

At the time, the currency of the world’s second-biggest cocoa producer strengthened by 3.9%, being the most as compared with over 140 currencies tracked by Bloomberg.

Nevertheless, the Cedi has since weakened against the dollar, now trading at 5.79 Ghana Cedi to one United States Dollar.