Research firm IC Securities has revised its end-2024 forecast for the US dollar to Ghana cedi exchange rate to GH¢15.91/US$, up from its initial projection of GH¢13.2/US$. This adjustment is attributed to the current macroeconomic environment.
In a statement, IC Securities explained the rationale behind the revision. “Following the unexpected cut in the policy rate by the Bank of Ghana in January 2024, we noted the potential for increased selling pressure on the local currency. Initially, we delayed raising our forecast, anticipating programme-related inflows and the final tranche of the cocoa syndicated loan for the 2023/2024 season. However, these inflows did not fully materialize, and the supply of GHS [Ghana cedi] overwhelmed the market.”
The firm highlighted several factors contributing to the cedi’s depreciation. “The subsequent adjustment to banks’ Cash Reserve Requirement (CRR) had a limited impact on local currency liquidity as banks mostly converted their maturing BoG securities into CRR positions. Additionally, fiscal expansion through the clearance of contractor arrears continued to increase GHS liquidity in the forex market, exerting pressure on the local currency.”
Despite these challenges, IC Securities remains optimistic about future inflows. “We expect an inflow of approximately $2.3 billion in the remainder of 2024. These inflows are largely attainable and add some credibility to our expectations. The cedi is likely to benefit more from the signalling effect of the World Bank inflows rather than from actual foreign exchange sales, as the Bank of Ghana continues to implement constrained interventions while building reserves.”
However, the firm anticipates ongoing volatility. “While these inflows could trigger a short-term retracement, we foresee continued hedging by domestic investors as we approach the December elections, potentially offsetting any appreciation induced by the inflows. Consequently, we raise our forecast for the end-2024 US$/GHS rate to GH¢15.91/US$.”
As of now, the Ghana cedi is trading at approximately GH¢15.00 to the dollar at forex bureaus.
