This revelation was made when the Vice President Dr Mahamudu Bawumia spoke at the Maiden Town Hall Meeting in Accra on Wednesday, April 3, 2019.
According to the Vice President, the sharp depreciation of the cedi was due to restrictions by the IMF for the Bank of Ghana to build its foreign reserves to about $800 million.
The situation has affected the supply of the dollar to businesses and the trading public between February and March this year.
He said “The most important and the proximate cause of the recent depreciation is the time inconsistency of an IMF prior action of the reserve target. At the end of January, as part of the seven prior action to complete the IMF program which went to the Board on March 20, 2019 the Bank of Ghana was required to ensure net international reserves (NIR) target on March 14, 2019 are the same levels as it was at the end of December 2018.”
Contrary to some speculation that the Bank of Ghana did not spend any reserves to revive the following the initial depreciation, the Vice President said some people have misunderstood the requirement by the IMF for the Bank of Ghana to build up its reserves by some $800 million to mean that the Bank of Ghana used that money to reverse the depreciation of the cedi.
“The reason for the sudden reversal in the sharp depreciation that we observed was that the market corrected itself. Investor sentiments, expectations and uncertainty acknowledged that the fundamentals are much stronger than suspected and that even without IMF, fiscal and monetary disciple is assured.”
Dr Bawumia added, “To meet the IMF program prior action, the Bank of Ghana had to rather build up reserves in a period of extreme demand pressures by some $800 million, and had no room to intervene in the foreign exchange market in line with approved intervention policy. This partly explains why Ghana came under significant pressure during this period which was exacerbated by speculation.”
Recently, President Akufo-Addo expressed his worry on the consistent depreciation of the cedi and assured that all efforts were put in place to arrest and restore it to stability.
He hence charged the Finance Minister, Ken Ofori-Atta and the Bank of Ghana to set a bipartisan committee to investigate the menace and find a long-lasting solution to it.
Although the President made the recommendation, the Vice President is emphatic that some restrictions from the IMF have caused the cedi depreciation.
Ghana has officially exited the IMF programme and the Finance Minister has assured that the country.