Speaking at the Graphic Business/Graphic Breakfast Meeting Dr Addison said, the cedi comes under pressure whenever non-resident investors move their monies to other countries which have more attractive investments abroad or when importers demand a significant amount of dollars to bring in goods or services.
Dr. Addison explained that despite “very significant improvement in macroeconomic indicators such as halving of the fiscal deficit, a nosediving inflation rate from 15.6% to a single digit, the currency suffered a depreciation.”
According to him, this was due to a strengthening of the US dollar as a result of US monetary policy which caused investors to move their money from economies like Ghana.
“If they see the yields on other markets are more attractive they will take their investments out,” he said describing the attitude of foreign investors.
A similar situation caused the cedi to lose 9 percent of its value by March 2019 the cedi was trading for ¢5.9 to a dollar.
Meanwhile, in March 2018, the cedi lost only 0.02% on the exchange rate market.
The cedi’s slide has however been reversed, with the dollar now trading at 5.1 cedis when it used to be ¢5.9 a month ago.
Dr. Addison said this happened due to the government’s successful issuance of a $3bn Sovereign Bond, the IMF’s pumping of the final tranche of $925million into the economy following Ghana’s completion of the Extended Credit Facility program with the IMF and the intervention of the bank in releasing foreign currency to ease the pressure.
The cedi’s improvement in recent times, according to Dr Addison, reflects a “successful reversal of sentiments on Ghana’s economic outlook.”
He nonetheless indicated that the underlying causes of the depreciation need to be addressed.
“We need to change the narrative on the currency.”
He indicated that the extractive industry as one sector that needs to see more locals participate in because foreign dominance means their dollar-denominated earnings are repatriated.
The government will also have to improve its debt management strategy to shift from financing the budget from non-resident investors.
He also asked for improvement in export earnings to attract more dollars into the economy as against imports which take dollars out of the economy and causes depreciation.
“You will be shocked to see how much Ghanaians spend on buying rice,” he said as reports show Ghana imports more than $1bn of rice. The Governor called for a reduction on import dependency syndrome despite the government’s slashing of import duties.
“We have to work on all fronts,” he said.