The cedi seems to have avoided the regular first-quarter curse by staying strong against the greenback, with analysts pinning its performance on the back of solid portfolio inflows and presence of the International Monetary Fund (IMF).
The cedi, for the past five years, has seen consistent massive depreciation in the first-quarter due to increased forex demand by importers who have to clear debts as well as multinationals repatriating profits, but this year seems to tell a different story.
Having opened the year at GH¢4.52, it is currently trading at GH₵4.42 – which represents a 2.43 percent appreciation on the interbank market.
Last week alone the unit appreciated 0.42percent against the greenback to close at the GH¢4.4250/4.4450 level.
In 2015, the cedi began the first quarter at GH¢3.22 and closed it at GH¢3.84, representing a whopping 16.06 percent depreciation.
In 2016, despite holding strong against the greenback, the cedi still depreciated marginally by 0.13 percent from GH¢3.835 to GH¢3.840; and in 2017 the depreciation stood at 2.41 percent, from GH¢4.25 to GH¢4.355.
Analysts, including South Africa-based RMB Research, are of the view that the cedi is holding firm due to the steady inflow of funds into the fixed income market – which is largely due to the benign inflation outlook.
“The presence of Big Brother (the IMF) has also aided in the cedi’s stability, as the fund has provided a policy anchor. Leading up to the April 2018 review of the existing programme, we are likely to see some strength as this will also come with a US$100m cheque that will bolster the country’s FX reserves – which are currently in excess of US$7.5bn,” RMB Research noted.
Though the cedi is enjoying some respite against the dollar, business leaders have consistently said that until the economy’s fundamentals are changed from import dependence to value- added exports, gains cannot be sustained over the long-term.
Managing Director of CalBank Frank Adu Jnr. has said before that the large imports of food and other products that can be produced locally can only go to weaken cedi.
“If we do not change our attitude as a people and say we will support our currency and economy and continue importing everything we need into this country, including toothpicks and toothpaste, we will not have a stable currency,” he said.
He believes that the economy has been over-liberalised, which is one of the woes the country faces. “Too many World Trade Organisations (WTO) rules have been accepted here.”