Gifty Annor-Sika Asantewah, the President of Women in Forex Ghana and a Financial Market Analyst, has downplayed the current rapid appreciation of the Ghanaian cedi against major trading currencies noting that it’s artificial and not sustainable. She thus, accused the government of Ghana of manipulating the exchange market to it’s advantage.
According to the financial analyst, though the appreciation of the cedi can help improve living standards and enable consumers to buy cheaper imports, the main reason behind the exchange rate increasing in value is very important.
“The appreciation of the cedi is only a short term measure largely fueled by positive speculation on the market after the staff level agreement is reached.
“The appreciation of the Cedi is not sustainable. The government is manipulating the market. The government is using fixed rate regime to control the cedi to drive appreciation of the cedi which is causing a lot of speculation.”
Gifty Annor-Sika Asantewah
In an exclusive interview with the Vaultz News, Ms Gifty Annor-Sika Asantewah noted that if there is an appreciation because the economy is becoming more competitive, then the appreciation will not be causing a loss of competitiveness. But, if there is an appreciation because of speculation or weakness in other countries, then the appreciation could cause a bigger loss of competitiveness.
Miss Annor-Sika, on how long the cedi could be sustained, averred that the recent strength of cedi can only carry it for a while because it will be supported with the International Monetary Fund’s (IMF) 3 billion dollars loan and once that is exhausted, the cedi will come back to its default setting.
“Again, sentiments about the reduction of interest rate by the Biden administration and the staff level negotiations with IMF has gotten investors excited. This has created a whipsaw and a lot of gaps on the market.
“The investment of the $3bn will help consolidate the Cedi’s appreciation for a short while… when the buzz dies, the depreciation might be worse. The market always corrects itself. After all is said and done, the market will go back to its initial settings.”
Gifty Annor-Sika Asantewah
Implications of Cedi Appreciation on the Stock Market
On the implications of the cedi’s appreciation on the Ghana stock market, the analyst stated that appreciation of the cedi will lead to stock prices increase whilst depreciation of the cedi currencies leads to stock prices decrease. “The downside and upside spillover risk effects are found from currency returns to stock returns and from stock returns to currency returns,” she stated.
Miss Annor-Sika explained that rising domestic currency means foreign investments will have lower returns when converted back to the local currency.
“Foreign investments are complicated by the Ghanaian cedi’s fluctuations and conversions between countries. This allows investors to take positions in foreign stocks and bonds without having to worry about foreign currency effects. In all, this appreciation is artificial. It makes the stock market very volatile and more risky.”
Gifty Annor-Sika Asantewah
Miss Gifty Annor-Sika Asantewah concluded saying, though there is a lot of speculation and gaps, its nice to see the cedi doing well. However, she added that the country doesn’t need an interim resolve, but needs perennial structural policy reforms. She moreover, pleaded with the managers of the economy to check the country’s debt metrics well going forward.
Meanwhile, the cedi depreciated against the American greenback by more than 54% before December 2022. However, the cedi has miraculously started to overpower the dollar and has strengthened by more than 33% since the beginning of December, 2022, alone.
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