Increase interest rates to curtail cedi depreciation – Finance Lecturer to BoG

Dr Preprah states how BoG can save Cedi from further devaluation

Cedi trading at GH¢7.35pesewas

Interest rates will attract more investors, Dr Preprah

The free fall of local currency - Cedi - against major trading currencies, Dollar, Euro and Pounds Sterling in recent times has been one of the concerns of Ghanaians, especially those in the trading community.

There have been calls on government to as a matter of urgency devise strategic measures to halt the further depreciation of the Cedi against other major trading currencies.

The latest to join in the call is the Chief Finance Officer of the Valley View University, Dr. Williams Peprah.

According to him, the Bank of Ghana needs to increase interest rates to help salvage the cedi's depreciation.

Dr. Williams Peprah explained that increasing the interest rate will attract more investors to purchase government bonds and securities.

“When a country’s currency is suffering from devaluation, as we have experienced in Ghana in the first 2 months of the year, where we have the worst performing currency, the only alternative to stop the devaluation is from increasing interest rates in the country,” he said.

“What it means is that instead of investors or citizenry not having confidence in the currency but to purchase dollars or foreign currency for savings, government will entice them with an increase in interest rates; so that they will purchase government bonds and government securities,” he added.

Dr Preprah however noted that increasing interest rates will have dire consequences on the economy and citizens adding that the cost of living will spike and slow down the economy for a while.

But increasing the interest rate, the finance lecturer, was the best option to control the widespread of margin between the forex market and the Bank of Ghana’s exchange rate.

The Cedi is currently trading at GH¢7.35pesewas at some forex bureau across the country.