Ghana: BoG to auction $120 million in Q1 2017

Jan 24, 2017

The plan to auction $120 million is to reduce further depreciation of Ghanaian cedi.

In its move to stabilise the cedi, the Bank of Ghana (BoG) has revealed that a sum of $120 million will be released to the forex market in first quarter of 2017. The auction is available to officially recognized forex dealing banks in Ghana. The $120 million auction will be spread through the first quarter releasing $40 million monthly. BoG is optimistic that this move will stabilize the local currency which depreciated by 15 percent against the US dollar in 2016. However, various reactions have followed the BoG's plan to auction $120 million. While some businesses believe it will reduce the depreciation rate of the cedi, others are of the opinion that it is inadequate and unsustainable. The Chairman of McDan shipping and logistics group, Daniel Mckorley speaking on this development said, "I don't see anything wrong with injecting dollars into the market. My problem is the amount of $40 million every month is woefully inadequate for the business community." In a similar reaction, an economist, Ishmael Yamson said, "clearly it is inadequate and unsustainable. It would just wet appetite on the market and would actually deteriorate the situation further." Over the next three months of auction, banks will experience increased demand beyond $120million as the cedi may experience further depreciation. Despite significant depreciation of the cedi over the last months, there has been a decline in bad loans in commercial banks, reducing from 19 percent in September to 17.4 percent as at December 2016. BoG is likely to cut benchmark interest rates for the second time since 2014. Currently, the Ghanaian cedi trades at 4.35 against the dollar. It is projected to trade at 4.32 against a dollar at the end of Q1 2017 and 4.45 against the dollar by the end of 2017.