Cedi Grows Stronger By 2010

Alhassan Andani - MD, Stanbic Ghana

STEPHEN BAILEY-Smith, Head of Standard Bank's International Research, has predicted that the cedi will continue its steady appreciation against the dollar and other major currencies from now until late 2010.

Speaking to corporate treasurers, finance directors, senior managers and journalists from various organisations at a day's seminar organised by Stanbic Bank Ghana recently in Accra, Mr Bailey-Smith, lauded Government for its tight fiscal and monetary policies, stating that the dollar was fast losing recognition in most emerging economies, hence its continued weakness.

This means opportunities for competing currencies.

The dollar is used mostly for international transactions in Ghana and therefore any further weakness in its value and its attendant excess would precipitate an appreciation of the cedi.

The Head of International research also indicated that the price of oil for the remainder of this year would hover around $85 on the average and rise between $120 and $150 per barrel next year.

“Global monetary and fiscal stimulus has prevented a dangerous deflation spiral. Seeds of another financial crisis have been re-created by asset price inflation. “Inflation, therefore, is less of a threat than deflation for most part of 2010,” he added.

Mr Bailey-Smith further noted that asset prices would continue until monetary accommodation is removed or global growth starts to be re-priced, stressing, “Policy makers should target asset prices inflation.”

On the global economy and its implications on Ghana's balance of payments, Ernest Addison, Director of Research at the Bank of Ghana, said the global economic crises, which prevailed since the last quarter of 2008, was being replaced by a modest recovery.

This year, he added, global gross domestic product is estimated by International Monetary Fund to shrink by 1.1 percent in 2009 from the previous estimate of 1.4 percent.

According to him, a rebound has been triggered by strong public policies in Asian and emerging economies.

In spite of the underperformance of the capital and financial accounts, January to September 2009 recorded an improved overall balance of payments deficit of $29.1 million compared to $716.8 million over the same period in 2008.

Additionally, developments on the international commodities market point to more favourable terms of trade for Ghana in 2010 and beyond.

It would be enhanced further by rapid global economic recovery, which is expected to improve significantly the capital and financial account of the balance of payments.

By Samuel Boadi