Cedi Appreciation Will Be Short-Lived - Economist
Economists are warning that the recent appreciation of the Ghanaian cedi may be short-lived, attributing the improvement to temporary factors rather than sustained structural changes. After a challenging year marked by high inflation and a weakening currency, the cedi has recently gained value against major foreign currencies, including the US dollar, the euro, and the British pound. However, experts are skeptical about the longevity of this positive trend.
Several factors have contributed to the cedi's recent recovery. Among them are inflows of foreign exchange from the International Monetary Fund (IMF) bailout package, increased remittances from Ghanaians abroad, and a more stable global economic environment. These factors have temporarily eased pressure on the cedi and allowed it to gain ground against its peers. However, economists argue that the fundamental issues plaguing the cedi have not been fully addressed, and these temporary improvements may not last.
One of the main concerns is Ghana’s reliance on imports, which continues to exert pressure on the cedi. The country’s import bill remains high, and without a significant shift in domestic production and export capacity, the demand for foreign currencies will likely continue to outpace the supply, eventually leading to renewed depreciation. Additionally, Ghana's external debt burden and limited access to international capital markets also pose risks to the stability of the currency.
Moreover, the recent appreciation has not been accompanied by substantial improvements in domestic economic fundamentals such as industrial production, agriculture, or exports. As a result, some economists predict that the cedi's appreciation is more likely to be a short-term adjustment rather than a sign of lasting recovery.
While the cedi's recent performance is certainly a welcome relief for many Ghanaians, economists urge caution. They stress that long-term stability can only be achieved through structural reforms that improve the productivity of the domestic economy and reduce the country's dependence on foreign imports. Until these issues are addressed, the cedi’s gains may be fleeting.