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The central bank of Ghana is expected to inject a whopping US$775million through its FX forward auction programme as part of efforts to stabilize the economy and hold the Cedi from depreciation throughout the year.
According to reports from the Bank of Ghana, US$50million of the US$775million will be pumped into the economy bi-weekly till the end of the first quarter.
Then from the second quarter, it will be slashed by half till the end of the year. What this essentially means is that US$300million will be injected into the economy in the first quarter alone to shore-up the cedi.
The data show this strategy has started bearing good fruit, as since the beginning of the year to Friday, January 15, 2021, depreciation of the cedi against the dollar has been infinitesimal – recording just 0.001 percent – using the central bank’s mid-rate as the basis for computation.
Usually – with the exception of last year when the coronavirus pandemic halted international trade, which resulted in an appreciation of the currency – the cedi sees a sharp depreciation in the first quarter each year, mainly due to high demand for forex from importers to settle their bills.
Analyst with Data Bank Research, Courage Martey – sharing his thoughts in an interview with the B&FT on how the cedi will perform against its major trading currencies this year, said the FX forward auction by the central bank is timely and appropriate and will go a long way to cushion the local currency as pressure from traders is bound to happen; especially when the economy seeks to embark on a recovery programme.
“The Bank of Ghana has issued the FX forward calendar for this year, and what we notice is that for the first quarter of this year they are seeking push US$50million dollars every two weeks for the first quarter of this year; and this is two times the size they intend to allot after the first quarter.
“So, we see a signal of firm commitment to support the cedi during the first quarter, which is normally a difficult period for the cedi every year. And this has given us reason to be confident that in addition to the foreign inflows, the FX forward auction by the central bank will support the cedi’s stability in the first quarter,” he said.