Aiming to stem its currency’s year-long spiral, Ghana’s central bank has taken a range of measures in the last two months including a crackdown with security operatives on supposedly unlicensed black market sellers on the streets of Accra. But the monetary overseer may have to scrutinize its own actions to understand the cedi’s precarious state.
In August, the Bank of Ghana said it would buy dollars from mining and oil companies repatriating returns into the country. The bank chose this initiative to boost declining foreign exchange supply to the economy, expecting to raise up to $4 billion a year from the effort.
The BoG has reportedly raised $84 million from the procedure so far. But the move appears to be squeezing the local currency market aggravating the cedi’s devaluation, according to JPMorgan, the investment bank. The cedi has lost at least 52% to the dollar this year (as of Oct. 20) making it the worst performing of 148 currencies tracked by Bloomberg.
JPMorgan said the BoG’s decision to buy dollars off mining companies reduced foreign exchange availability within the interbank market, according to local media quoting the global firm: “To reduce volatility, we believe the BoG may need to use proceeds from mining sector FX purchases to increase interventions, or alternatively, reverse the FX purchase policy.”
At present, the BoG is only able to offer $25 million at its auctions, against a demand of $100 million.
Ghana is under pressure to reverse an economic slide that rolls back recent gains that had seen the country rated as one of the world’s fastest growing markets.
While discussions are ongoing on a $3 billion IMF bailout, groups within the country are pushing for other fixes. Last week, traders embarked on a three-day shutdown of stores. This week, many members of parliament asked president Nana Akufo-Addo to sack finance minister Ken Ofori-Atta, who has held the job since 2017.