An economic analyst, Courage Kingsley Martey has said that all things being equal, the cedi would end the year at 3.9 to the US Dollar.
Mr Martey, who is a Senior Economic Analyst at Databank, indicated that the current economic conditions in addition to the anticipated revenue from the sale of bonds on the international market, would see the cedi stabilize against the dollar. He indicated that Databank Research had earlier in the year predicted the local currency to hover between 3.9 and 4.3 Ghana Cedis to a dollar, but looks more likely to end at the former.
“The expectation was that the cedi would end the year between 3.9 and 4.3 maximum to a dollar. However given the recent developments on the market and expected inflows for the second half of the year, we will lean towards the lower band of GH¢3.9 to a dollar by the end of the year,” he said.
Ghana’s central bank confirmed in June that it would release a daily amount of $20 million in an effort to stabilize the cedi. The move ultimately led to a sharp appreciation of the cedi against the major foreign currencies. The past few weeks saw the cedi depreciate slowly but this has been compensated with more stability in recent times. Mr Martey believes that the central bank’s intervention could be a leading factor.
He added that the government’s expected inflow from its Eurobond sale coupled with COCOBOD’s expected loan facility are two other factors that would ensure the stability of the local currency.
“The cedi will see more stability in the second half of the year due to COCOBOD’s expected loan facility of $1.8 billion and the government’s Eurobond sale expected to rake in $1.5 billion. This increased inflow of dollars will support Ghana’s reserves position, allowing the Bank of Ghana to smoothen volatility on the foreign exchange market till at least the end of the year,” he said.
Mr Martey said that although these interventions would stabilize the local currency in the short term, more needed to be done to ensure its stability in the long term.
The economic analyst hinted that a repeat of the cedi’s depreciation could occur in the first half of 2016 due to inherent challenges. The biggest challenge, he said, is the country’s balance of payment deficit and election uncertainty.
In the first quarter of this year, the country’s balance of payment deficit was $850 billion. This, he said, led to a shortage of foreign currencies on the market, culminating in the sharp depreciation of the cedi in the first half of the year.
Mr Martey said there was the need to increase exports through economic diversification while adding further value to the country’s products to ensure that external vulnerabilities are reduced. The cedi’s appreciation against the dollar led to price reductions among some commodities, namely crude products.
What does this mean for the real estate sector?
Mr Martey said he doubts it would have any significant effect on demand in the short term. He said it is because mortgage lenders are unlikely to reduce prices, which could see them post losses instead of profits.
“In the short term I don’t see any increase in the demand for real estate. Any available mortgage right now will include a higher exchange rate so that pricing regime cannot be reduced within a space of three weeks cedi appreciation.
“What they would want to do is to recover the cost they have incurred over the first six months of the year before looking at adjusting their prices again,” he said.
Managing Director of Lamudi Ghana, Akua Nyame-Mensah said: “The cedi’s stabilization is essential. Businesses have not been able to adequately plan all year and have been spending on unbudgeted expenses.
“As a result of a more stable currency, mortgages would become more accessible. This has a positive effect on the economy because developers and mortgage lenders are to meet their financial objectives while the housing deficit is reduced.”