On My Radar: The cedi’s dance with dragons
I'm the same person who was angry at the rate of the Ghana cedi's depreciation two weeks ago. (See last week's column here. )
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Then it was 4:35 to the dollar. Today it's 3:46. Honestly, I didn't know that the cedi would ‘betray’ me this way by getting its act together so soon.
The value of some small euros that I was expecting, which I planned to use to sort out myself small, has reduced by about 30 per cent. And it's bound to reduce even further in the coming days. This development has thrown my plans out of gear.
Is this how the cedi will repay those of us who supported it to rise - fasting and praying and all? If you want to rise, why don’t you wait till some of us have exchanged our hard-earned foreign currencies?
My Facebook pal, Francis Kennedy Ocloo, was telling me a week ago that he also lost some money on his euros. He went to the Forex bureau and they gave him a rate of 3.88, which seemed ridiculous to him at the time. So he rushed to the black market, where he reluctantly sold each euro for 4 cedis. (Can you imagine? he was one of those calling on the cedi to rise!) Two weeks ago, it would have been for 4.99 cedis per Euro. Assuming Francis exchanged 1000 euros, it means he lost Ghc1000!
The bad thing (in this case) is that, assuming Francis is exchanging that same 1000 euros today, he will get it at rate of 3.81 cedis per euro or less. This means he will lose about 1200 cedis.
The rate at which the cedi is rising is so alarming and perplexing that people who hoarded dollars (with the hope of exchanging it for a lot of cash later) are scrambling to dump it. Unfortunately for them, many of the Forex bureaus don't want to take it!
And the cedi is bound to continue rising for some time because of some expected foreign currency inflows within the next few months: The World Bank this week approved some money for Ghana (about $250 million or so); the second tranche of the IMF cash is on its way; the government is expecting about $400 million in budget support from some development partners; the government is going for a $1 billion Eurobond; COCOBOD's $1.8 billion cocoa syndication loan is on its way as well.
This is generally good news for Ghana’s import-led economy, because it means the prices of goods will reduce. Already, we’ve seen a 15 per cent reduction in the price of petroleum products.
The cedi is currently dancing with the dragons that are ‘dollars’, ‘euros’ and ‘pounds’, and it is winning.
But can this dance be sustained. Can we keep the cedi at the current level vis-à-vis the dollar over a certain period of time? I certainly hope so.