IMF Demand at Root of Ghana’s Cedi Slump, Deputy Leader Says

ACCRA (Capital Markets in Africa) – Ghana’s central bank was unable to support the weakening cedi because the country had to build reserves to meet the requirements of its bailout program with the International Monetary Fund, Vice President Mahamudu Bawumia said.

The currency of West Africa’s second-biggest economy collapsed as much as 16 percent against the dollar this year after offshore holders of domestic debt failed to roll back their maturing investments. The cedi pared its year-to-date losses to 7.6 percent by 8:46 a.m. on Thursday.

Ghana’s four-year, extended credit-facility agreement of almost $1 billion with the Washington-based lender ended on Tuesday, Bawumia said at a conference Wednesday in the capital, Accra. After reserves declined from levels where they were in December 2018, the IMF required that they be raised again to the same amount by March 15, he said.

The central bank “had to essentially hold their hands” and couldn’t intervene on the market during this particular period, he said. That was the “most important and proximate cause of the recent depreciation.”

The country’s gross international reserves increased to $9.2 billion at the end of March after the country raised $3 billion in Eurobonds, the Bank of Ghana said in a report on its website.

An official at the IMF in Ghana couldn’t immediately comment when contacted by phone.