Analysis: Cedi appreciation could reduce cost of living

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The Ghana cedi continuous to appreciate against the US dollar on the interbank market. Over the past five days the local currency has recorded some substantial gains against the dollar.

The Ghana cedis has gone down from about 4 Ghana cedis 50 pesewas to 3 Ghana cedis 65 pesewas at some of the major commercial banks in the country.

Some analyst are attributing this to the increase in supply of dollars by the Bank of Ghana and projections that the local currency could be appreciating strongly against the US dollar in the coming weeks.

Being an economy that actually imports majority of what it consumers, an appreciating cedi could result in prices of goods and services going down.

How? Well, majority of what we consume in Ghana are brought in from outside hence importers wouldn’t need more Ghana cedis to bring the same quantity of goods.

This also means importers will not have to pass on the cost of getting more dollars on to consumers, which could lead to prices of goods going up.

Another area of interest is prices of petroleum prices. Even with the current performance of the cedi, some marketers have reduced their prices by 10%.

Hence if the current appreciation of the cedi is sustained it could also result in a reduction in inflation rate.

Also, interest rates that government is paying our external loans – which is put at around 10 billion Ghana cedis – will also drop substantially.

Some analyst even think that utility tariffs could also go down if the cedi appreciation is sustained.

SOURCE: myjoyonline