2020 cedi appreciation an “outlier” – Professor Bokpin
Professor of Finance at the University of Ghana (UG), Professor Godfred A. Bokpin, says the gains the Cedi made in January 2020 are values that deviate from the norm.
The economist believes the depreciation of the Cedi is inevitable but manageable.
However, judging from the way “the Cedi behaves the first quarter of every year” this year’s inroads is at variance with normal trends.
“The appreciation, we have seen this year, seem almost an outlier,” he said in an interview on Accra-based Joy FM.
Even before proceeds from the recent $3 billion dollars realised from the Eurobond sale to shore up reserves, the Ghana cedi made a strong appreciation of 3.4 per cent in 2020 after a poor depreciation record of 12.9 per cent at the end of 2019.
Bloomberg adjudged the gains as the best among more than 140 currencies it tracked within the period.
Some critics say there is a correlation between the performance of the cedi and the Coronavirus scare in China.
Ghana is an import-dependent country with most retailers sourcing goods from China.
The Convid-19 disease, which has killed more than 1000 and infected in excess of 42, 000. It has slowed economic activity in the World’s second-largest economy, hence reduction in the demand for dollars in Ghana for travels and payment of Chinese goods.
Some economists have attributed the appreciation of the cedi to the health disaster in China but Professor Bokpin is not attributing the development solely to the coronavirus.
He explained that the governing New Patriotic Party (NPP) planned and executed measures to contain the drastic depreciation in 2020 which will be an election campaign topic.
“The BoG has been preparing for this as well,” he observed.
He explained that from the second half of 2019 “the BoG has been building its reserves for which reason it allowed the cedi to depreciate the way it did last year”.
That was the reason for the significant depreciation which resulted in Bloomberg concluding that the currency was one of the worst performers in 2019.
“They (government) allowed the cedi to come under greater accumulative pressure last year and also building their reserves for 2020 which is an election year”.
For him, if the cedi had recorded much more decrease in value in the first quarter of 2020, it would have been much difficult to tackle, which would have put the government in bad light ahead of the polls.