Two days after the government declared a suspension of interest payments to some external or international creditors, the Ghana cedi has resumed its depreciation path.
This is owing to the high demand for US dollars with only one and a half weeks to the end of the year.
Some experts, who believed that the cedi’s recent stability was not fundamentally maintained, blamed the abrupt fall on the timing of the announcement of the suspension of interest payments to Eurobond holders and some institutions.
Following the launch of the government’s internal exchange program, the cedi steadily increased in value versus the US dollar for two weeks, reaching 9.20.
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However, according to Joy Business checks at several forex bureaus, the local currency is trading at 12.20 to one American ‘greenback’ on the forex market. However, the Bank of Ghana is pricing ¢8 to 1 on the interbank Forex markets.
The same might be stated about the cedi’s performance in relation to other major foreign currencies. It is now selling at 12.30 to the euro and trading at 13 to the pound.
If the current trend continues, the recent advances that have resulted in lower prices for petroleum products and other market items may be reversed.
Suspension of external debt repayment: we must be cautious not to jeopardize recent cedi gains.
Professor Williams Peprah, Associate Professor of Finance at Andrews University in Michigan, USA, has cautioned that the cedi’s recent gains would be eroded if the government does not step carefully in discussions for new terms with creditors of its foreign debt.
As part of its debt restructuring program, the government announced on December 19, 2022, the suspension of Eurobonds and other foreign debt payments.
This suspension will not apply to payments of multilateral debt, new obligations (whether multilateral or otherwise) committed after December 19, 2022, or debts relating to specific short-term trade facilities, according to a statement from the Ministry of Finance.
SOURCE: myjoyonline
