Without paying external debts, cedi still depreciated by 7.4% in just 2 months

The local currency has depreciated by about 7.4 percent in the first two months of the year (end of February, 2024).

The dollar ended February trading between 12.85 and 12.87 cedis compared to about 11.87 and 11.96 on the first day of trading on the real time forex trading platform.

This decline comes despite the country’s limited servicing of external debts.

Moreover, the typical phenomenon of cashing out gains on the bonds market, which often contributes to the depreciation of the cedi, is absent due to the collapse of the once robust bonds market caused by the debt restructuring programme.

Furthermore, the depreciation of the cedi persists despite the government’s highly publicised Gold for Oil program, which Vice President and NPP flagbearer Dr. Mahamudu Bawumia had asserted would stabilise the currency.

Traditionally, the local currency experiences significant depreciation in the first quarter of the year, with 2022 marking one of the worst in recent memory.

However, this year, the usual factors contributing to cedi depreciation are largely absent due to the debt restructuring programme and restrictions on forex supply for certain exports.

Therefore, experts are shocked by the substantial loss in value of the local currency against the US dollar, suggesting that all was still not well with the economy.

Many people are reeling under severe economic hardship following the introduction of taxes considered as obnoxious.

Although inflation had declined steadily from over 54 percent in December 2022 to 23.2 percent by December 2023 after a bailout from the International Monetary Fund (IMF), it rose again to 23.5 percent in January 2024, spiraling concerns that the taxes and other hash government policies could worsen the cost of living in the country.

Meanwhile prices of petroleum products have gone up in the last two pricing windows, a situation that could further drive-up inflation in coming months.

The Chamber of Petroleum Consumers attributed the increases to the depreciation of the cedi as well as some upward trend in global pricing, collapsing the argument that the Gold for Oil programme was the panacea to the cedi and petroleum price stability.

In a related development government continues to pile up huge debt through treasury bills, borrowing over 17.5 billion cedis in last three weeks alone at between 26 and 30 percent.