Ghana is arranging for additional reserves to intervene sooner than planned in order to prop the local cedi currency which has weakened to new lows this week, two Central Bank sources said on Thursday.
The cedi has been under pressure since early February .
This was so after the new government announced it had uncovered contract arrears of $1.6 billion and a budget deficit close to double digits, compared to the 2016 target of 5.25 per cent of gross domestic product.
The comments ruffled risk-averse investors,leading to a surge in offshore dollar demand amid a seasonal liquidity crunch as local businesses settle their first quarter import bills.
“It’s a worry but the central bank is working to hold it in collaboration with the fiscal authorities,” one source said.
“We are arranging for additional reserves to boost our interventions…going forward, the plan is to front-load our interbank presence,” another source said, declining to provide details on the additional funding source.
Officials have attributed the cedi’s persistent decline to a seasonal high dollar demand by bulk oil distributors and other heavy importers to settle maturing bills.
The government of new President Nana Akufo-Addo is set to present its first budget to parliament in early March and market watchers say uncertainty about Ghana’s next economic policy direction has led to some investors to sell off stocks and bonds.
“Offshore investors are still in the market with demand and their volumes are huge,” an Accra-based currency analyst said.
The cedi steadied at a record low of 4.4600 to the dollar on Thursday, compared to 4.4100 a week ago, down by 5.5 per cent this year.
The West African country is more than halfway through a three-year aid deal with the International Monetary Fund to restore fiscal balance to its economy dogged by high deficits, widening public debt and inflation.
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