The First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari, has said that the Bank of Ghana and the Finance Ministry should be commended for the relative stability of the local currency in the last three and half years.
Over the period, the performance of the Ghana cedi against the US dollar has been topical amongst economist as well as political actors. Out of some 15 key currencies on the continent, the cedi remained relatively stable going down by only -2.86 percent from January 2020 to date.
It is this performance that Dr. Opoku-Afari says reforms in fiscal and monetary measures by the Bank of Ghana and Finance Ministry have been responsible for.
“We entered 2020 with a very solid foundation in terms of gross international reserves accumulation. We ended 2019 with about $8.4 billion in terms of gross reserves which was about 4 months of import cover and that is the highest we have ever had which shows that we have enough cushion to be able to stand any external vulnerabilities. If you look at previous years, most of the time the currency moves very fast in the first five months of the year. But this time, we entered the year with this solid level of gross international reserves.” He said speaking to Philip Nanfuri on Accra based MX24 TV.
The deputy governor added that one reform is the introduction of the Forward Auction Market in late 2019 which was fully implemented in the first quarter of 2020. This according to him allows people to buy foreign exchange ahead of time which reduces market sentiments.
Commenting on other factors that have contributed to the stability of the cedi, he noted that the US$3 billion Eurobond from the capital market and the $1 billion advanced to the country by the International Monetary Fund (IMF) have also played a very instrumental role.
“On top of that, through proper timing and a wind of chance, we happen to go to the Eurobond market just before the pandemic hit and got in US$3 billion to add to the gross international reserves that have built up. In addition, when the pandemic hit, Ghana accessed US$1 billion from the International Monetary Fund as part of the Rapid Credit Facility (RCF) to address the COVID.
So when you put all these together, it positions the Central Bank to be able to have enough reserves to be able to support the currency going forward. That is why in the first 3 months of the year, we saw an appreciation of the currency whereas in other similar months in comparable years back, we saw significant depreciation,” he added.