Analyst warns of potential dollar dumping as cedi strengthens

David Ofosu-Dorte, Executive Chairman of AB & David Law, has raised concerns. He worries about potential dollar dumping in Ghana's financial markets. This comes as the cedi appreciates against the US dollar.

His warning follows mixed reactions to economic adjustments after the cedi's recovery. On May 27, during Joy FM's Super Morning Show, he expressed his fears.

He said, "If the dollar goes below a certain point, it may lead to dumping by financial institutions." He emphasized the need for a stabilization point to avoid market disruption.

The cedi has performed well against major currencies. It has appreciated by 22% since January 2024. However, inflation remains high at 23%. There is a growing gap between exchange rate improvements and commodity prices.

Currently, most commercial banks have adequate dollar buffers. They report a 40% drop in dollar demand since March. Importers are cautiously optimistic but are keeping their dollar positions.

Economists recommend gradual dollar conversion instead of panic selling. Abrupt moves could undermine recent gains in the currency.

Mr Ofosu-Dorte also suggests structural reforms for deeper economic transformation. He noted that dependence on imports is problematic. While boosting exports and manufacturing can help reduce this dependency, he seeks specific details on achieving these goals.

He identified three critical gaps in current economic discussions: mindset change, policy consistency, and a stabilization framework.

He questioned our attitudes towards price adjustments based on currency fluctuations. "When the dollar rises, we raise prices quickly," he said. "But when it falls, we resist lowering them."

He prefers policy approaches over compulsion but stresses discipline without relying on IMF interventions every seven years.

Finally, he acknowledged the Governor's call for stability but stressed the need for clear parameters to prevent volatile market reactions.