First Deputy Governor of the Bank of Ghana (BoG) Dr Zakari Mumuni says the recent appreciation of the cedi is no fluke.
He insists it is the result of deliberate and disciplined policy choices, especially at the domestic level.
“This is maybe unprecedented,” Dr. Mumuni said on PM Express Business Edition last Thursday.
“If you look at the data from when we started the floating rate regime to now, this is the only time within the first four or five months that we have had this level of strength in the Ghana cedi.”
According to him, the local currency has appreciated by 12.2% since the beginning of the year.
“Same time last year, we had depreciated by about 13%. So this is a complete reversal of what the situation was,” he noted.
Dr Mumuni acknowledged that both domestic and external factors are at play. But he stressed that the bulk of the gains are rooted in internal decisions.
“You will see that the domestic factors really have more weight in this case, in this performance, than the external factors.”
At the heart of these gains is a controversial yet deliberate monetary policy stance.
[embedded content]“We raised the policy rate. A lot of people, including GUTA, came after us. They had all kinds of comments. Analysts were not happy about that,” he recalled.
“But we knew exactly what we were doing. And it’s the fruits you are beginning to see,” he added confidently.
The Bank’s decision to tighten policy, he said, was aimed at one thing — disinflation.
“We lifted or tightened monetary policy for one reason — to make sure we re-engineer the disinflation process.”
That goal was pursued aggressively through liquidity control.
“We’ve been very, very strong on liquidity sterilisation,” he said. “We are doing this through our open market operations.”
Dr. Mumuni explained that this effort to soak up excess cedi liquidity has had a stabilising effect on the currency. “This is really helping a lot to take out cedis from the system. And that is actually linked to the policy decision that was made.”
He also pointed to a prior move to adjust banks’ cash reserve ratios.
“This has already sterilised some cedi liquidity in the system. That’s part of what is feeding into this stability.”
He said the central bank was clear-eyed about the cost of these policies but had no doubt about their necessity.
“It wasn’t popular. But we stayed focused. And now the numbers speak for themselves.”
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