After a tumultuous 12 months for the cedi last year, Fitch Solutions predicts that the cedi will close the year at 12.40 against the dollar. Following Ghana’s engagement with the International Monetary Fund and a probable injection of 3 billion dollars into the economy, Fitch says the capital will ease dollar demand and quench the local cash crunch.
While the cedi’s long-term outlook is gradually stabilizing, Fitch warns that short-term volatility will persist. The government had earlier assured citizens that the IMF funding would be disbursed in March. However, the IMF has been adamant about financial assurances from external lenders further delaying the approval of funding.
According to Fitch, the Cedi will begin stabilizing once the markets get an indication that a formal creditors committee is formed, and the IMF executive board approves Ghana’s bailout program.
Last year, the cedi deteriorated against the dollar losing 38 percent of its value. At its lowest, the dollar was trading at 15 cedis with the cedi dropping to the worst currency against the dollar. In 2023, the cedi has gained sizable mileage against the dollar only deteriorating by 14 percent in the retail market trading at 12 cedis. The value loss is far much steeper on the interbank forex market at 21 percent.
The Cedi closed last week on a losing streak having shed 1.03 percent of its value to the dollar trading at 12.10. The local currency has also not been spared against other major currencies with a 1.34 percent loss to the pound and 0.96 percent to the Euro.
The volatility of the cedi last year saw the cost of goods and services double.. Local and foreign investors also began dumping the local currency following the 38 percent value loss to the dollar.
The recent stability has seen the government take credit attributing the recovery of the currency, touting economic recovery and changes in economic and fiscal policies. However, experts dispute the claim. Last month, the Ghana Ports and Harbor Authority put out a distress call to stakeholders on the massive drop in port activities.
Unions such as the Ghana Union of Traders Association and Importers and Exporters Association of Ghana blamed the drop on tough economic times and the aggressive tax framework spearheaded by the government. As a result, traders are unable to ship in goods thus reducing demand for the dollar.
Now, the country waits for approval from financiers such as the Paris Club for the disbursement of the bailout. Should the currency begin to recover against the dollar both consumers and investors in the market will have a sigh of relief.