The Bank of Ghana (BoG) is ready to intervene vigorously this year to ensure a much more stable currency, Yao Abalo, Head of Treasury of the bank said, after the cedi slumped 31 percent against the dollar in 2014.
The currency, which had stabilised in the last four months, has come under renewed pressure in recent weeks on increased dollar demand by local traders.
It traded at 3.2600 to the dollar on Wednesday, down two per cent from its level at the start of 2015.
Mr. Abalo told Reuters in Accra on Wednesday that the central bank viewed the current pressure on the cedi as seasonal and temporary, and had begun boosting liquidity support to calm market nerves.
“We have started increasing our support for the market, and we will continue to do so vigorously this year, in addition to other plans to ease foreign exchange uncertainties,” he said.
He, however, did not give details of what those plans were.
Some analysts say the renewed pressure on the cedi was due to seasonal dollar demand for first-quarter imports as well as speculative dollar buying.
Mr. Abalo said the bank’s aim was to implement policies that ensured a more stable currency, making it unnecessary for people to hold excess dollars. “It should not matter whether you are holding dollars or cedis. We want to avoid what happened last year,” he said.
The cedi was hit last year by investor concerns about the government’s finances.
Ghana, which produces gold, cocoa and oil, is now in talks with the International Monetary Fund (IMF) on an assistance package to stabilise its economy amid rising inflation, and debt and fiscal slippages.
The central bank has not given a forecast for the cedi this year. However, market watchers predict the currency will decline by 10-15 per cent against the dollar in 2015, buoyed relative to last year by a potential IMF programme.
Mr. Abalo said the key focus for the bank this year was to ensure not only a more stable currency, but also to pursue policies that would boost investor confidence in the government’s efforts to fix its fiscal problems.
Source: Ghanaian Times
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