Accra - Financial experts at tmi Consulting Limited's business information division, have predicted that the cedi, will lose 38% of its value during the second half of this year, thus adjusting to the volatile free market economy.

The Cedi depreciated by 37% for the second half of 1999. In the first quarter and first half of 1999 the depreciation of the local currency was 2.99% and 7.83% respectively. The rate of depreciation for the full year was 49.23%.

The trend in the foreign exchange market for the first six months of this year has not been better. The Cedi fell in value by 15% in the first quarter of this year compared to 2.99% in the same period of 1999.

The trend will create more problems for Ghanaian businesses that are yet to recover from the shock created by the foreign currency shortage that started during the Easter.

The team used inter bank dollar exchange rate data, collected over 56 weeks between July 5, 1999 and July 24, 2000. The simulated financial data predicts that the cedi will continue its downturn against the major world currencies. The experts computed the accuracy of the analysis and judged it closely to 97% precision.

The accumulated data was processed using a polynomial model concluded that by December the cedi would sell at about ?8,000 to the dollar in the Inter Bank exchange market. The company has been monitoring the economic policy of the government over the past three years.

The computer-generated model forecast that the exchange rate of the local currency to the dollar would reach ?7,000 by October. It will increase to ?7,800 in November before settling around about ?8,300 in December when pressure on the cedi is expected to be at its highest in the year.

According to the analysis, orders for goods from abroad for the Yuletide will impact on the exchange rate between October and November and reach its peak in December.

They said if the government makes serious efforts to implement a sound economic policy within the given time frame, the cedi would put up a good fight in the currency market and regain its past glory.

However, should the prevailing economic conditions deteriorate further, the local currency may create more trouble for Ghanaian businesses especially those companies that import their raw materials. Should the cedi run amok, majority of Ghanaians who are already facing hardships may enjoy black Christmas.

The battered cedi went through serious problems when the currency war was heightened around Easter, and it became evident that the local currency was fast loosing its value.

In May, the Bank of Ghana blamed the forex bureaux and illegal currency dealers for engaging in speculative business that creates artificial shortage of the cedi.

A set of measures were adopted to regulate the activities of forex bureaux including a ceiling to a single transaction with a customer, and the disclosure of identity of those who purchase or sell foreign exchange to accredited forex bureaux. As part of the draconian measures taken by the Bank of Ghana, currency traffickers were also arrested in parts of Accra in June but it did not stabilize the falling cedi.

The International Monetary Fund (IMF) criticized the government's unpopular measures that is aimed at propping up the weak cedi, and threatened to put on hold Ghana's vital foreign exchange allocation unless the Bank of Ghana stops the implementation of the tough measures.

The IMF hastily released $60 million, which formed part of a $210 million promised Ghana under the fund's Medium Term Expenditure Framework that runs between 1999 and 2001 to save the economy from total collapse.

The fight between the cedi and the greenback is a straight one in which the cedi is loosing. The money from the IMF was gobbled in a couple of weeks by queuing companies anxiously looking for foreign exchange to transfer to their principals or partners abroad.

Over the years the government interfered with the exchange regime and on many occasions intervened by drawing hard currency from the nation's foreign reserves to prop up the cedi. This let to depletion of the external reserves of the country. It subsequently became evident that the central bank could no longer provide hard currency to fortify the pampered cedi against the major currencies.

The currency crunch created a fertile ground for currency traffickers who in their business as usual stance reaped huge rents.

Meanwhile, some banks in the country are running out of cedis and have made repeated withdrawals from their reserves at the Central Bank to meet the high demand by their customers.

The Bank of Ghana however denied that there was shortage of the local currency but rather attributed the fast depreciation of the cedi against the greenback to "panic buying by some corporate companies".