There has been quite a lot in the news lately about the Ghanaian cedi falling to record low levels. It was this tweet from one of my Ghana Tweeps (Twitter-peeps) that got me thinking about the freefalling cedi:
So what exactly does happen to the cedi in election years? Thanks to my big brother who introduced me to Oanda and their amazing currency tools, I was able to find out. The graph below shows the value of one US dollar to the Ghanaian cedi from January 2000 to March 2012. Calculations were based on the old Ghana cedi exchange rate since the conversion to the new Ghana cedi took place within this period. The y-axis shows the increase in numeric value of the cedi. At the start of the graph back in January 2000, 1 USD = 2,500 cedis (approximately). By March 2012, the exchange rate was 1 USD to 17,279.4 cedis (1,73 GHS).
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| Historical Currency Rate (picture is a weird size) Source: Oanda.com |
Interestingly, Kwabena was right. The cedi did drop in value dramatically in 2000 and 2008 which were both election years. Very curiously, the cedi remained quite stable against the dollar in 2004 which was also an election year. So economist types, please tell me, why does the value of the cedi drop during an election year? In other words, why does the cedi have election year blues?
7 comments:
Interesting point, Abena!
I am no economist, nor a politician. The only thing I notice from this graph is that 2004 was the only election year where the ruling party retained power. If that is any indicator I guess it would mean we're heading for a change of government at the end of this year...
@Maya Mame *LOL* So it would appear based on the graph. However, there are so many other factors to consider such as the fact that the electoral roll is changing for the better supposedly...Not sure how oil, confidence in the present administration, perceptions of the opposition NPP, the role of the Rawlingses will factor in. Its all up in the air...
@Maya Mame, something else I've noticed is that perceptions in the Ghanaian political terrain have changed considerably in 4 years. A perfect example is what I heard a panelist on JoyFM's Newsfile show repeat yesterday. In just 4 years, the perceived "violent [political] party tag" has actually shifted from one party to another. Boggles the mind.
Wow, that is very interesting! For the reasons you've mentioned and many others I am really beginning to feel that I am missing out on being away from Ghana in this exciting political year. Anything could happen!
Capital flight, depreciation of the cedi and many others have joth positive and negative implications. When there is depreciation of the cedi, export prices become goid and prices were for exports become favourable. If we had had a stong manufacturing base, and a vibrant export market, we wiuld have been smiling all the way to the markets. That is why US was pressuring China to revalue their currency and compplains of cheap Chinese exports. On the other hand a depreciating cedi increases cost of imports for both the raw materials for manufacturing and finished products.
A deprecuated cedi i think is as a result of hedging by noth local and foreighn investors becos of the increased electoral temperature ochesterated by an Opposition flagbearer who seem unrepentants if his threats of all die be die even against wise counsel by all well meaning Ghanaians. We must all reject these war mongers and their party. I guest ti a large extent, it was deliberate to get a campaign message since all the micro and macro economic indicators have all proven to be stronger than when they were in Government. So desperate we they that they begun doughting the State Institutions and yheir methodologies they have been using for decades. Tjis is the real story my sister
Please i made few typo mistakes and readers should take note. They include : joth instead of both, good instead of goid, would instead of wiuld, depreciated instead of deprecuated,both not noth etc
Thanks for sharing why you think the cedi has depreciated Be-Awuribe.
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