[ 2021-02-03 ]

Cedi to end 2021 at GH¢6.18 – Databank Research
Source: Charles Nixon Yeboah

The Ghana cedi will end this year at GH¢6.18 to
the dollar, according to projection by Databank
Research.

This will be 3.02% lower than 3.9% depreciation
recorded last year.

According to Databank Research, the mid-year rate
of the Ghanaian local currency to the dollar will
however be GH¢6.04 pesewas.

“The Ghana cedi appears well supported for
another year of relative stability but not without
pressure points. We forecast full year 2021
depreciation range of 3.02% – 6.18%”, it said
in its 2021 Economic Outlook Report.

Factors that could support the Ghanaian local
currency this year include the planned Eurobond
issuance in the first quarter of this year and a
modest recovery in oil export receipts without
significant loss in gold revenue.

Others are continued use of domestic interest
rates to attract foreign portfolio inflows, which
is already showing positive prospects after the
December 2020 elections and the continued Bank of
Ghana interventions in the spot and forward
market.

Already, the Bank of Ghana’s forex forward
calendar for this year shows a stronger commitment
to support the cedi through the first quarter of
this year.

This Databank Research believes this deepens its
optimism about a stable foreign exchange outlook.

“However, the cedi could be weighed down by a
recovery in the import bill as economic activity
rebounds. The risk of sudden foreign capital
outflows amidst the elevated financing pressure is
also noteworthy”, the report emphasized.

Benefits of stable cedi

A stable currency will boost spending in the
economy as the purchasing power of consumers
remain strong.

Secondly, it makes imports less expensive and
thereby reduces imported inflation.

Cedi records almost 1.0% appreciation in January
2021

The cedi ended the first month of this year with a
marginal gain of almost 1.0%, as it is presently
trading at about GH¢5.90 pesewas to the US dollar
on the interbank forex market.

This positioned it as one of the best performing
currencies among 15 sub-Saharan African currencies
including the Egyptian pound and the Nigerian
naira.

The cedi lost about 3.9% in value to the dollar
during the whole of last year, and analysts
attributed it to largely the country’s
diversified exports.

Currency analyst, Courage Martey told Joy Business
the stable picture for this year’s outlook is
same as last year.

“The cedi has started the year in a similar
fashion as it did in 2020 and year-to-date it
seems to have recorded an appreciation. The
year-to-date gain against the US dollar is about
1.0%, and that is good news for importers because
their cost of sales is supposed to be stable at
worst.”

“And whiles cost of sale is not going up then
there is no incentive to push up the prices of the
goods that you are selling and so it also benefit
consumers, it benefit businesses and it benefit
the whole economy because once the cedi is doing
quite well it boost investor confidence”, Mr.
Martey said.

Source - MyJoyonline

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