Prof. Godfred Bokpin; an Economist and Finance Expert has attributed the decline of the Ghanaian cedi to the fact that there is no confidence in the economy.
He attributes this lack of confidence to a number of factors one of which is “Election year uncertainties”.
He said “election years come with their uncertainties and this election promises to be competitive hence foreign investors adopt a “wait and see” attitude.
Prof. Bokpin who was speaking in an interview on radio monitored by rawgist.com further explained that residents and local businesses also avoid major decisions as the elections draw near. “They may not trade their dollars but will rather want to store their value as a way of managing the uncertainty.
“If you had 1 million cedis right now, there are very limited options available. People will keep it and look for more stable options and the cedi is not stable” he noted.
Prof. Bokpin also cited the International Monetary Funds (IMF) programme with Ghana as another cause of the cedis’ woes. He explained that under the programme, the Central Bank was barred from intervening in the currency exchange market when the cedi fell against major trading currencies. He says the situation prevented the Bank of Ghana from entering the foreign currency market to stabilize the Cedi.
He also explained that entities that need dollars in three months on are currently in the spot markets accumulating dollars instead of going to the forward markets. “The forward markets are not working. It is so shallow that people who need dollars in three months are on the spot market accumulating the dollars right now. We are fast-forwarding the pressure of three months’ time to today” he explained.
He concluded that the fundamentals of the economy are weak. “The fundamentals of the economy are weak and like Dr. Bawumia said, if the fundamentals of the economy are weak, the exchange rate will expose you” he said.
END
