BY NADIA NTIAMOAH
The Ghana cedi has recorded marginal weekly gains against the US dollar on the interbank foreign exchange market for more than three consecutive weeks, with market participants attributing the recovery largely to improved dollar liquidity and increased foreign exchange supply through the Ghana Gold Board (GoldBod).
The recent appreciation represents a turnaround from the pressure experienced by the local currency in August and early September, when demand for dollars increased, partly due to importers seeking foreign exchange to finance purchases ahead of the Christmas season.
Traders and bank treasurers say the increased availability of dollars has helped ease pressure on the foreign exchange market, with GoldBod emerging as a significant source of supply under the revised foreign exchange intermediation framework.
Bank of Ghana Governor Dr Johnson Asiama has acknowledged that the cedi experienced pressure during the period, partly because of substantial payments, particularly within the energy sector.
Speaking at an engagement with global investors in Bangkok, Thailand, on the sidelines of the Annual Meetings of the International Monetary Fund and the World Bank, Dr Asiama said the large payments had marginally affected Ghana’s international reserves.
He assured investors that the central bank was working with GoldBod to improve foreign exchange liquidity, strengthen reserve accumulation and sustain stability in the currency market.
The Governor’s comments highlight the delicate balance facing monetary authorities as they seek to meet foreign exchange demand while maintaining adequate reserves to support the economy.
The latest gains in the cedi suggest that increased dollar supply may be helping to ease some of the pressures that contributed to its earlier depreciation. However, market participants indicate that the sustainability of the recovery will depend partly on whether the improved liquidity continues.
Traders and bank treasurers who spoke to JoyBusiness identified increased dollar supply from GoldBod as one of the main factors behind the cedi’s recent performance.
According to the market participants, GoldBod’s pricing arrangements have also contributed to the downward movement in exchange rates by making dollars available at rates below those prevailing in the spot market at the time of some transactions.
JoyBusiness understands that GoldBod sold US$130 million during a spot foreign exchange sale on Tuesday at GH¢11.60 to the dollar, a rate below the prevailing spot market rate at the time.
The transaction is understood to have contributed to improved dollar availability for participating banks and helped ease demand pressures in the market.
Some market participants say the increased supply has reduced the need for certain banks and traders to submit additional requests for foreign exchange, potentially easing competition for available dollars.
Under the arrangement, GoldBod conducts its sales through the GoFX platform, which provides an electronic channel for distributing foreign exchange to authorised commercial banks.
The sales complement the Bank of Ghana’s broader efforts to improve liquidity and promote orderly conditions in the foreign exchange market.
Market sources estimate that GoldBod may have supplied more than US$500 million to commercial banks during October under the revised framework. However, the figure has not been officially confirmed.
Some commercial banks remain cautiously optimistic that the cedi could maintain relative stability if the increased supply of dollars is sustained.
