Cedi to experience moderate depreciation this year – Standard Bank


Economists at the research desk of Standard Bank, the parent company of Stanbic Bank Ghana, have said that Ghana’s central bank – the Bank of Ghana – may have appetite for moderate depreciation of the country’s currency this year. The information was contained in the March 2018 edition of the Bank’s African Local Markets Monthly report.

“Our more constructive view of Ghana’s twin deficits suggests that we do not expect a disorderly depreciation of the US$/GH¢ this year. Indeed, we still expect that the currency should depreciate by a moderate 6 percent year-on-year to close the year at around 4.75 due to our expectation of a rebound in import demand as private sector credit growth recovers,” the report noted.

The report further said: “As if to reinforce this view, during recent interactions with the Bank of Ghana Governor there seemed to be an appreciation for the fact that on an interest rate differential basis, the Ghana cedi appears to be marginally overvalued. As such, should some moderate upward pressure emerge, the Bank of Ghana is unlikely to stand in the way of such a realignment”.

According to Ayomide Mejabi of Standard Bank Research, the Ghana cedi is one of the few currencies that appreciated significantly over the past month.

“The Ghana cedi, returning about 2% since publication of the last edition of this report, is one of the few that appreciated significantly over the past month. The recent move does not appear to be driven by enduring factors, even though there is mounting evidence that the BOP is strong nonetheless; while we expect US$/GH¢ to reverse course over the remainder of the year to end at 4.75, the carry is still compelling,” Mr. Mejabi said.

Speaking on the projections for depreciation of the Ghana cedi, Head of Global Markets at Stanbic Bank Ghana – Afua Bulley, said the local currency’s stability is a positive sign that is indicative of growth and macroeconomic stability. “If the BoG is able to manage moderate depreciation against the major trading currencies, we are likely to see a Ghanaian economy that is not only growing and stabilising but also rubbing shoulders with economies of Europe and the West with regard to tradem,” Ms. Bulley said.

  • The Standard Bank African Markets Monthly also reports that the Ghana central bank’s financial reserves position is likely to be bolstered in the coming weeks, with the issuance of as much as US$2billion in Eurobonds as well as another US$500million in Global Depository Notes. This, the reports said, should take financial reserves to a multi-year high of at least US$6.8billion, covering six months of imports.

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