Ghana Cedi Challenges: Fitch Predicts Modest Gains For Struggling Local Currency In Coming Months

Ghana Cedi Challenges: Fitch Predicts Modest Gains For Struggling Local Currency In Coming Months

  • The coming months will see the cedi appreciate against the dollar, according to Fitch Solutions, a rating agency
  • According to Fitch, the cedi's worst run against the dollar and other trading currency is over and expects modest gains up to December 2022
  • The ratings agency however warned that the appreciation of the cedi could take a toll on the inflation rate

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Good news for the struggling cedi and Ghana’s economy because Fitch Solutions has predicted that the local currency will be making modest gains against the US dollar in the days ahead.

An analyst at the credit rating agency has said although the cedi has struggled in the first months of this year, it looks good in the months ahead.

Ben Weaver told Joy Business that the worst has already happened for the cedi, and he expects appreciation up to the end of 2022.

Ghana cedi notes
Some GHS1 and GHS5 denominations of the Ghana cedi. Source: Getty Images
Source: Getty Images

He, however, warned that predicted cedi appreciation will take a toll on the country’s inflation rate.

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“We don’t expect inflation to accelerate too much high the way it is,” he gave a word of encouragement.

Currently, GH¢7.45 is equivalent to $1.

The cedi’s dramatic fall compelled the Bank of Ghana and the Finance Ministry to take drastic steps to forestall a forex catastrophe in Ghana.

First, the central bank’s Monetary Policy Committee in March hiked the rate at which the Bank of Ghana lends money to commercial banks (or the policy rate) to 17%, representing a 2.5% increase.

That policy rate increase was the first time in close to four years.

The central bank also increased its cash reserve by 12% and reset Capital Conservation Buffer to the pre-pandemic levels.

Through the Ministry of Finance, the government also cut discretionary spending significantly by a total of 30% -- 20% first and another 10% later.

The Finance Minister, Ken Ofori-Atta, also announced a 50% cut in fuel coupon allocations to all heads of government institutions and persons appointed by the president, Nana Akufo-Addo.

These moves were aimed at shoring up confidence in the struggling economy.

Cedi Depreciation: UK-Based Economist Intelligence Unit Predicts Almost GH¢8 To $1 By End Of 2022

Meanwhile, UK-based Economist Intelligence Unit (EIU), a global economics analyst, has predicted that the Ghana cedi will hit GH¢7.87 to $1 by end of this year.

With Ghana’s local currency currently selling at GH¢7.69 to a dollar, the prediction by the EIU presents a further slump of the cedi, which has been struggling against major trading currencies since the start of the year.

A report by Joy News that quotes EIU’s April 13, 2022, analysis of Ghana’s economy states that the projection of the cedi fall by December this year will be influenced by the country’s heavy dependence on imports.

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