- Regulator has no target rate for currency, helps smooth swings
- Fiscal consolidation, monetary policy to help stabilize cedi
Ghana’s central bank said anticipated inflows in the final quarter of 2015 and the government’s plan to reduce spending will help boost its currency, the worst-performer in Africa this year.
“With the expected inflow of about $4 billion in the fourth quarter of 2015, the benefit of fiscal consolidation, and a tight monetary policy stance, we expect to see some appreciation and stability in the cedi going forward,” the Accra-based Bank of Ghana said in an e-mailed reply to questions on Friday.
The cedi has weakened 23 percent this year, the most of 24 African currencies tracked by Bloomberg, as President John Dramani Mahama’s administration contends with the slowest economic expansion in 20 years. At the same time, the government is trying to narrow its fiscal deficit to meet the terms of a bailout loan it took from the International Monetary Fund as demand for its oil and cocoa exports collapsed.
It’s still too early to determine what impact currency devaluations from Kazakhstan to China will have on Ghana, the central bank said. Thursday’s move by Kazakhstan, central Asia’s largest crude exporter, to abandon its currency peg has intensified speculation that authorities in Africa will devalue or halt intervening in their foreign-exchange markets.
“Ghana has a floating exchange regime, meaning that the Bank of Ghana does not target and pursue any particular exchange rate,” the regulator said. “Rather, the exchange rate is determined by market forces. The central bank only intervenes to smooth out excessive volatility that are inconsistent with economic fundamentals.”
The regulator sometimes intervenes in the market with more than $20 million a day, and other times with less, depending on foreign exchange and cedi liquidity, requests for currency and inflows, it said.
The cedi weakened as much as 2.7 percent and gained as much as 1.8 percent on Friday before trading unchanged at 4.20 per dollar by 4:55 p.m. in Accra. The currency dropped to a record low of 4.49 on June 29.