(Bloomberg) -- The Bank of Ghana held interest rates at a lofty 29% to support the cedi and warned speculators that they will regret betting against the battered currency.

The bank “remains fully committed to provide stability in the exchange rate for the cedi,” Governor Ernest Addison told reporters in Accra, the capital, on Monday. “The bank has enough foreign exchange reserves to support the market and economic agents should stop engaging in speculative purchases as they will suffer economic losses when the correction occurs.”

The cedi declined 0.3% to a record low of 14.646 per dollar by 1:25 p.m. in Accra following the decision. The unit has lost 10.5% of its value against the dollar since late March, when the bank also left rates unchanged, making it the worst performing currency in the world over the period. 

Addison said the rate decision was warranted to “ensure that the recent depreciation of the currency does not become embedded into the pricing behavior of business and inflation expectations.”

Annual inflation eased slightly to 25% last month from 25.8% in March and has been above the 10% ceiling of the central bank’s target range for almost three years.

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“The Bank of Ghana is taking measures to improve market conduct and instill sanity in the market for foreign exchange,” he said, spelling out a number of steps being taken to defend the currency.

They include directly stepping in to absorb the foreign exchange needs of some companies to ease dollar demand from commercial banks, and streamlining foreign payment paperwork to reduce the incentive to avoid red tape by going into the unofficial market.

“The bank is fully aware of the operations of illegal operators in the foreign exchange market and is working with the financial intelligence center to sanitize the market,” he said, adding that foreign exchange bureaus must stop advertising their rates with immediate effect and a task force has been set up to ensure compliance.

The cedi’s depreciation has been driven by increased foreign-exchange demand for imports, payments to private power producers, speculative activity on the part of some buyers of dollar and a decline in cocoa earnings, Addison said.

Revenue from exports of the beans, which Ghana uses to defend the currency, fell 49% to $599 million in the first four months of this year. A mix of adverse weather, disease and a shortage of fertilizer has curbed output in the world’s second-biggest producer of the chocolate ingredient.

Debt Restructuring

The currency could start to recover with a $360 million disbursement from the International Monetary Fund expected at the end of June, after the nation received a draft agreement to restructure debts with its official creditors on Thursday.

Ghana is reorganizing most of its $45 billion debt, as part of a $3 billion IMF program. Reaching a deal on a draft memorandum of understanding was a condition to get the $360 million installment.

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--With assistance from Artyom Danielyan.

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