IMF says Ghana reacted “slowly to sharp cedi depreciation”

The International Monetary Fund has noted that Ghana’s reaction to the fall of its currency  the cedi against the US dollar has been slow.

The Ghana cedi has fallen by 15.1% against the US dollar during the first five months of 2012, the Bank of Ghana (BoG) said June 13, 2012.

The fallen percentage of the national currency is compared to the 1.9% depreciation it recorded in the same period of 2011.

In a statement July 13, 2012, Deputy Managing Director of the IMF, Mr. Naoyuki Shinohara, said Ghana’s “Monetary policy has reacted slowly to the sharp cedi depreciation and the associated inflation risks.”

“A rapid depreciation of the cedi is fuelling inflation and reserve cover has fallen below comfortable levels,” Mr Shinohara said.

Ghana’s annual inflation rose for a fourth straight month in June 2012, reaching 9.4%, according to the Ghana Statistical Service.

According to the Fund, lose conditions have now been tightened and will need to remain tight to preserve the credibility of the inflation-targeting regime.

It urged Ghanaian authorities to stand ready to “raise the policy rate further, if needed, and manage liquidity tightly, while restoring foreign exchange reserves to more comfortable levels”.

“Financial sector reforms continue to be a priority,” Shinohara said adding, “the authorities should sustain their efforts to strengthen the legal and regulatory framework and improve supervisory capacity.”

It will also be important to continue to address long-standing deficiencies in Ghana’s anti-money laundering and combating the financing of terrorism (AML/CFT) regime,” Mr. Shinohara added.

By Ekow Quandzie