Once again the cedi is facing serious pressures. The B&FT reports that the currency has depreciated by 5.2% against the dollar in 2017.
There’s a debate on-going about what is causing this depreciation and I will join that later on. But right now I wonder why nobody makes the case that the dollar’s strength and not the cedi’s weakness is the problem.
Let’s take a look at the dollar index. This measures the strength of the dollar against a basket of its major trading partners.
As we can see from the chart, the dollar has been on a tear since 2015. This certainly has had an effect on the Ghana cedi’s depreciation. I am not making an excuse for the country. I have written extensively about our fiscal and monetary challenges. However we simply can’t have a complete analysis of the currency situation without looking at the dollar index.
PS: This post is not as extensive as it should be. I will do a more thorough analysis of our currency when I get the time.