Relative stability of Cedi: Why is BoG not using 2017, 2020 reference point? – Prof. Gatsi asks

Economist and Dean of the University of Cape Coast Business School, Professor John Gatsi, has questioned the Bank of Ghana’s (BoG) decision to adopt the 2022 reference point to conclude that the Ghanaian Cedi has seen “relative stability”.

According to the governor of the BoG, Dr. Ernest Addison, the Cedi has stabilised relatively in the first quarter of 2024.

Current data shows that the Ghanaian currency has witnessed a 6.8% depreciation since January 2024. As of the close of the day on Tuesday, March 26, the Cedi was selling at 13.75 to the US dollar.

Prof. Gatsi, in an interview with Alfred Ocansey, host of TV3’s Ghana Tonight programme, explained that “relative stability, as the Bank of Ghana is using it, means that they have a reference point so they are looking at the depreciation today as against that reference point. So if you listen to them, you will see that they are using 2022 as the reference point to say that the depreciation now is better than the depreciation in 2022 and for that matter, they’ve concluded that there is relative stability”.

He continued, “But the question is, why is the Bank of Ghana not interested in 2020? Why is the Bank of Ghana not interested in 2017? So that is the question we all need to ask”.

As regards the exchange rate figures, Prof. Gatsi asserted that the BoG is using a minimum rate, known as the “indicative rate,” which differs from what the forex bureaus use.

“It seems to me the Bank of Ghana is using the minimum exchange rate, what they are calling the indicative rate”, said the finance and economics professor at UCC.

“We all know that we have exchange forex market that is intermediated by financial institutions. The exchange rate there is different from the exchange rate in the open market,” he said, adding, “Forex bureaus are also licensed and therefore it is a recognised market, if you go there, the rate is also different and if you go to the black market, the rate is different”.

Prof. Gatsi further maintained that the majority of business owners and individuals use the Forex Bureau, hence, the exchange rate at the Forex Bureaus increases their cost structure.

This cost, according to him, is therefore transmitted to the final consumer.

Meanwhile, Prof. Gatsi further stated that, if all the factors outlined were considered, the Cedi would’ve seen a rather high depreciation rate of 16 percent, unlike the 6.8 percent according to the BoG.

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