Cedi falls against major trading currencies

Ghana’s currency, the cedi, has begun the week on a downward trajectory, losing marginal grounds against major currencies, including the US dollar, the pound, and the euro. The dollar is currently being sold for GHS 11.30 at the retail forex market.

Analysts are uncertain about what is causing the sudden depreciation of the cedi, but there is hope that the country will secure a bailout from the International Monetary Fund (IMF) to help stabilize the economy and shore up the value of the cedi.

According to the Financial Times of the UK, Ghana hopes to take a big step towards restructuring its $58 billion-worth of debt this week, with its bilateral creditors meeting on April 11, 2023, to discuss whether to provide enough relief to unlock a $3 billion IMF bailout. The success of the external debt restructuring and the availability of non-concessional loans could help stabilize the cedi in the near term.

Finance Minister, Ken Ofori-Atta, expressed hope that Ghana’s bilateral creditors would consent to enough debt relief to enable the country to tap an IMF loan package agreed last year. The restructuring of external debt is considered critical for Ghana’s economic recovery, given that the country has struggled with mounting debt, a widening budget deficit, and high inflation rates.

Economic Analyst, Kweku Arkoh-Koomson, had earlier projected a stable cedi in the near term if the external debt restructuring is successful. He noted that “as we wait for an IMF deal this second quarter, we observe that government in the 2023 budget reiterated that the budget will be financed by non-concessional loans. Looking at how these non-concessional loans will also boost local reserves and improve FX liquidity, if nothing at all, the cedi will stabilize.”

Ghana has had a history of currency volatility, with the cedi depreciating significantly against major currencies over the years. However, the country has taken several measures to stabilize its currency, including the introduction of the Ghana Fixed Income Market (GFIM), which has helped boost liquidity in the forex market.
Despite the recent depreciation of the cedi, there is hope that Ghana’s economic recovery efforts, including the debt restructuring and the availability of non-concessional loans, will help stabilise the currency in the near term. The success of these efforts would be crucial for the country’s economic growth and development, as well as for the stability of the cedi.