by Adnan Adams Mohammed
The wind of unclear picture of how the exchange rate of the cedi to other foreign currencies will end in the year is still lingering around as more financial analysts speculates.
An investment banker in the country have express hope the cedi will rebound from its poor performance against its major trading currencies when an estimated US$4billion inflow comes into the country in the next three months.
The Executive Director of H&K Brokers and Trade Solution, Mr. Kelvin Adarkwah is optimistic that expected inflows from Eurobond, cocoa syndicated loan and donors? funds will shore-up the cedi?s value.
?Roughly, we are looking at around US$4billion — so if you look at that quantum of funds it should be able to support the cedi in the short-term toward the end of the year. That is why I am so confident that the cedi will finish the year strongly,? he said.
However, a Senior Economic Analyst at Databank, Mr Courage Kingsley Martey, has said the cedi is likely to end the year at GH? 3.9 to the dollar.
He said current economic conditions and the anticipated revenue from the sale of bonds on the international market would see the cedi stabilised against the dollar.
Mr Martey made reference to a databank research that had earlier in the year forecast the cedi to float between GH? 3.9 and GH? 4.3 to a dollar.
Mr Martey said: ?The expectation was that the cedi would end the year between GHc 3.9 and GHc 4.3 maximum to the dollar.
?However, given the recent developments on the market and the expected inflows, for the second half of the year, we will lean towards the lower band of GH? 3.9 to a dollar by the end of the year?.
Subsequently, Dr. Godfred Bokpin, Head of the Finance Department of the University of Ghana Business School, is also optimistic that if government is able to ensure fiscal discipline from now up to next year, then the cedi will rebound and the economy can generate enough cash inflows in order to service the debts.
Mr. Bokpin recommended that: ?What government has to do is be able to identify projects that can generate cash inflows on their own, and based on that borrow against them knowing these projects are economically viable and self-financing?.
Mr. Adarkwah who expresses his comments on the sidelines of a panel discussion in Accra on the topic, ?The Fluctuations of Currency Exchange Rates and Their Impact on Doing Business in Ghana?, organised by Good Governance Africa, suggested that, ?The medium- to long-term future of the economy needs to be addressed by policy-makers. We need to address one fundamental issue, which is that our demand for imports of foreign currency is higher than our exports. Obviously, this creates imbalances which need to be addressed.?
Fiscal and monetary managers of the economy are upbeat about recovery of the cedi following its recent depreciation against especially the US dollar, and expect the US$1.5billion Eurobond, US$1.8billion cocoa syndication, and about US$500million from donor partners to save the local currency.
This forecast portrays a brighter end to the year for the Ghanaian economy, which has been bedevilled by negative exchange rate fluctuations.
The country?s currency has over the past few years been on the downturn, and was ranked among one of the worst-performing currencies in the world last year.
At the beginning of the year, the US dollar exchanged at GH?3.2, but as at August 10, 2015 it was trading at GH?4.1 — a 24.2 percent depreciation in eight months.
According to financial analysts, the cedi is expected to depreciate by about another 5 percent by the end of this year.
But Mr. Adarkwah projected that if all these factors come into play, then the cedi will move to between 3.3 and 3.5 on the exchange market.
Moreover, Mr Martey further argued that, the Central Bank?s daily release of $ 20 million in June in effort to stabilise the cedi led to a sharp appreciation against the major foreign currencies.
However, in the past few weeks, the cedi had seen slower depreciation and more stability.
Mr Martey said he believed that the Central Bank?s intervention could be a leading factor and noted that expected inflows from the Eurobond sale and COCOBOD?s syndicated loan facility were two factors that would ensure the stability of the local currency.
?The cedi will see more stability in the second half of the year due to COCOBOD?s expected loan facility of $ 1.8 billion and the Government?s Eurobond sale expected to rake in $ 1.5 billion,? he stated.
?This increased inflow of dollars will support Ghana?s reserves position, allowing the Bank of Ghana to smoothen volatility on the foreign exchange market till at least the end of the year?.
Mr Martey said that although these interventions would stabilize the local currency in the short-term, more needed to be done to ensure long-term stability.
The economic analyst hinted that a repeat of the cedi?s depreciation could occur in the first half of 2016 due to inherent challenges.
The biggest challenge, he said, was the country?s balance of payment deficit and election uncertainty.
In the first quarter of this year, the country?s balance of payment deficit was $850 billion.
This, he said, led to a shortage of foreign currencies on the market, culminating in the sharp depreciation of the cedi in the first half of the year.
Mr Martey said there was the need to increase exports through economic diversification, while adding more value to the country?s products to ensure that external vulnerabilities were reduced.
He noted that the cedi?s appreciation against the dollar led to price reductions in fuel products but expressed doubts about any significant effect on demand in the short-term.
He said this was because mortgage lenders were unlikely to reduce prices, which could see them post losses instead of profits.
?In the short-term I don?t see any increase in the demand for real estate,? he said. ?Any available mortgage right now will include a higher exchange rate so that pricing regime cannot be reduced within a space of three-week cedi appreciation.
?What they would want to do is to recover the cost they have incurred over the first six months of the year before looking at adjusting their prices again?.
The Managing Director of Lamudi Ghana, Ms Akua Nyame-Mensah has also reteirated that, ?The cedi?s stabilisation is essential. Businesses have not been able to adequately plan all year and have been spending on unbudgeted expenses.
?As a result of a more stable currency, mortgages would become more accessible. This has a positive effect on the economy because developers and mortgage lenders are to meet their financial objectives while the housing deficit is reduced.?
