The Bank of Ghana will increase its foreign reserves this year and is ready to use the dollars to buy cedis, Africa’s worst-performing currency this year.
The cedi will “remain strong” against the greenback after the International Monetary Fund agreed to lend $918 million to Ghana, Yao Abalo, head of treasury at the Accra-based bank, said by phone Tuesday. The currency has dropped 29 percent against the dollar in the past year, according to data compiled by Bloomberg.
“We will supply dollars to the market if we see the need,” he said. “The program unlocks donor funds which we’ll also use to shore up the reserves.”
Ghana turned to the Washington-based lender last year for money to support the cedi and to help narrow the fiscal gap. The nation’s gross reserves dropped 10 percent in January to $4.9 billion, the lowest level since August, according to data compiled by Bloomberg.
The cedi dropped 1 percent to 3.835 per dollar at 1:11 p.m. in Accra, the capital. The currency gained as much as 0.7 percent after the bank’s comments to 3.77, the strongest in more than a week.
“The expected inflows are going to help the cedi stabilize,” Michael Otu Fiaw, research analyst at Accra-based NDK Asset Management Ltd., said by phone. “The information calms down people who previously were hoarding dollars. With the expected inflows, they would be ready to free dollars onto the market or just hold enough.”
NDK forecasts the cedi to be 4 per dollar by the end of December now that Ghana is on the IMF program, Fiaw said. Without the IMF help the currency was headed to 5 per dollar by mid year, he said.