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Cedi depreciation: BoG defends 120 million dollars auction

The Bank of Ghana (BoG) has justified its 120 million dollars auction for the first quarter of this year to control the depreciation of the cedi.

The central bank maintains that the move forms part of measures to protect the forex market from any shocks due to the volatility of the market.

“We shall continue with our auctions that we talked about as part of our regular forex interventions and 120 million dollars auction that you heard about. That’s not all of it, some take it to be that 120 million dollars is all we are going to use to be present in the market but that’s just part of it,”

Official figures from the Bank of Ghana show that the cedi had depreciated by 1.3 percent to the dollar as at January 19, 2017.

The figure however represents a sharp decline from the 9.2 percent recorded in December 2016.

The auction for the first quarter of 2017 also follows a similar one carried out by the central bank in November 2016.

At the time, the central bank auctioned 60 million dollars from the 1.8 billion dollars cocoa syndicated loan contracted in September 2016.

Economist, Dr. Said Boakye explained to Citi Business News the move is an unsustainable means to stem the depreciation of the cedi.

“It is a little bit difficult to predict the impact on the cedi because this is a completely new policy by the central bank. Previously, the depreciation of the cedi was in relation to what people thought the Bank of Ghana had control over; if the bank of Ghana had so much reserves, people thought it could fully support it so the speculative component of foreign exchange demand was tamed,” he said.

But Governor of the Bank of Ghana, Dr. Abdul Nashiru Issahaku explains that the move is necessary.

“Our regular, normal interventions to moderate our utilities on the forex market would continue. We are also going to continue with swaps in bridging facilities with our partners as buffers to our reserves that we are going to continue to do as well.”

Meanwhile the General Manager of Treasury at HFC Bank, Joseph Nketsia asserted that the move is in the right direction to shore up supply to meet high demand for dollars.

He explained that the opening of Chinese market in February and the high demand usually associated with traders settling their debts in the first quarter makes the support inevitable.

“This is what the Bank of Ghana is doing to supplement what is already available to the market. It is unsustainable yes, but without their intervention, the cedi will depreciate at a very faster rate.”