Kobla Nyaletey, Head of Markets at Barclays Bank, has predicted that the local currency, the cedi will depreciate further against the major foreign currencies in 2016.
According to him, most of the currencies in West Africa depreciated significantly in 2015 as a result of lower oil prices and tourism receipts.
“If the number of tourists falls then the foreign exchange earnings to those economies fall as well. For 2016, in particular, I think the currencies will depreciate again. Fundamentally, the point is that these currencies should weaken versus the dollar but it is the quantum of the weakness which then becomes the subject for conversation,” Mr. Nyaletey told BUSINESS GUIDE in an interview in Accra recently.
He indicated that the weak global oil price had been a key influence towards the weak currency position that Ghana witnessed this year.
“Given that today oil prices are around $48 per barrel, next year it is forecast to average $53 and that isn’t a quite recovery. As a result, these economies would see some amount of pressure as well,” he said.
Earlier this year, a dollar was sold at GH¢4.3 on the market. It is now selling at GH¢3.82.
He added that the challenges that confronted the Ghanaian currency this year would largely remain in 2016.
“In the case of Ghana, we should begin to see some recovery towards the end of 2016 as new oil production from the Tweneboa, Enyera and Ntomme (TEN) projects come on stream,” he noted.
Bank of Ghana’s Measures
“The mandate of the central bank is to achieve price stability and therefore in instances where the currency begins to move in a disorderly manner, the central banks must intervene to eliminate that harmful movement in the currency,” he said.
Mr Nyaletey added that BoG cannot continue to inject money into the country’s economy to stabilize the cedi.
“Central banks cannot continually and perpetually defend the currency. Central Bank action should be once in a while. It should simply be targeted to eliminate such disorderly movement. The central bank cannot on daily, weekly, monthly and throughout the whole year defend the currency. That is not realistic and unsustainable,” he said.