Cedi Performs Well In 1st Half

Dr. Mahamudu Bawumia

ECONOMIST AND Business Consultant, Dr. Ebenezer Ashley, has indicated that the Ghana cedi has recorded its all-time best performance against the U.S. dollar for the first half of 2020 than the first six months of any year since 2014.

Dr. Ashley made these observations in an interview with our reporter on the current developments in the exchange rate market amid the Covid-19 pandemic.

Supporting his claims with data, Dr. Ashley indicated that “you see, as the data shows, the cedi performance shows a first six months depreciation of 26.71% for 2014; 26.2% for 2015; 3.26% for 2016; 3.73% for 2017; 2.37% for 2018; 8.35% for 2019; and 2.36% for 2020. Thus, although in nominal terms there has been an upward spiral of how much cedi one needs to buy a dollar bill the rate has been slowed.”

He continued that “yes, it is so easy for political purposes to say that we used to buy a dollar at say GH¢4.6 on the market at end of 2016; so why are you saying it is getting better now that we are buying it at, say GH¢5.6? But the truth of the matter is that people forgot that prior to the end of 2016 it had shot up from GH¢1.2 to buy the dollar to the GH¢4.6. So if in a period of four years over GH¢3 was added to how much cedis one needed to buy the dollar, and within an averagely same period of time, just about GH¢1 was added; there is no doubt the performance has been better and that is what the depreciation data tells us. In both instances traders are losing money but one is obviously leading to lower loses than the other. That is the context within which the arguments must be situated.”

While urging government to continue to adopt measures and policies that will further enhance the strength of the cedi for the benefit of all Ghanaians, especially traders, Dr. Ashley highlighted what seemed to be a harrowing development on the exchange rate markets’ development across emerging markets.

He indicated that as at June 2020, the South African currency had depreciated by 21.4%, Mauritius 9.3%, Brazil 31.6%, Turkey 15.4%, Argentina 17.9%, Russia 16.0%, Zambia 28.2%, Mexico 17.4% and Ghana 2.4%. And again, within this context the cedi records the highest performance.

Asked whether or not the strong performance in the cedi in 2018 could be attributed to mainly drop in imports as a result of Covid-19, Dr. Ashley opined that it could be a cause but not the cause. He argued that all the other countries registering huge depreciations also import but were depreciating in double digits mainly but that of the cedi was lower. He believes that prudent management of Ghana’s economy and strong and steady economic fundamentals such as inflation, interest rates, real GDP growth, gross international reserves as well as other country-specific idiosyncrasies are accountable for the relative stability of the cedi.

Dr. Ashely urged political actors to do deeper analysis and be guided by the data before making comments to disparage the ongoing efforts that had been anchoring the success story we were seeing today on the cedi performance. “If you listen to the politicization of the cedi performance you will think we are in the abyss but, no, we are not. Remember as far back as 2018 some politicians said the cedi was hitting 6 to the dollar. But here we are in 2020, two years after we have still not hit that,” he added.