Fitch Solutions expects the Ghanaian cedi to recover some of its losses against the US dollar in the coming months. The London-based firm attributes this optimism to improved investor confidence, more US dollars flowing into the country, and better global economic conditions.
In their article titled “Sub-Saharan Africa Currency Round-up: Greater Stability Ahead in Second Half of 2024,” Fitch Solutions notes that these external factors will likely support currencies across Sub-Saharan Africa in the next few quarters.
They predict that the Ghanaian cedi will perform better in the second half of 2024. So far this year, the cedi has lost 19.2% of its value against the US dollar, making it one of the worst-performing currencies worldwide. Weak market sentiment during debt negotiations has limited the inflow of capital. However, signs of economic recovery, such as a rise in real GDP growth from 3.8% in Q4 2023 to 4.7% year-on-year in Q1 2024, have increased the demand for foreign exchange.
Additionally, Ghana’s international reserves were low in March, covering only 2.5 months of imports. Combined with agreements with the International Monetary Fund (IMF) to let the exchange rate adjust naturally, this has resulted in minimal intervention in the foreign exchange market by the Bank of Ghana this year.
Looking ahead, Fitch Solutions projects that the cedi will regain 9.0% of its value by the end of the year, starting from its value on July 9, 2024. This follows Ghana’s recent agreement with international bondholders to restructure $13 billion of external debt, which should be completed by September 2024. Fitch Solutions believes this development will boost investor confidence, increase capital inflows, and strengthen the cedi.
Furthermore, the anticipated easing of US monetary policies starting in September could weaken the dollar. This may increase investor interest in higher-yielding assets in emerging markets like Ghana, thereby providing further support for the cedi.
Currently, the cedi is trading at GH15.75 per dollar at forex bureaus, reflecting a depreciation of about 20% against the US dollar.
