Fitch Solutions has forecasted a recovery for the Ghanaian cedi against the dollar in the coming months, attributing this to enhanced investor confidence, increased dollar inflows, and easing external conditions.
In an article titled “Sub-Saharan Africa Currency Round-Up: Greater Stability Ahead in Second Half of 2024,” the London-based firm predicts that external factors will provide more support to Sub-Saharan African currencies, including the cedi, in the coming quarters.
The cedi, which has lost approximately 20% of its value against the US dollar this year, is currently one of the worst-performing currencies globally. This decline has been driven by weak capital inflows due to subdued market sentiment and ongoing debt restructuring negotiations. However, Fitch Solutions expects the cedi to perform better in the second half of 2024.
The start of an economic recovery in Ghana, with real GDP growth accelerating from 3.8% in Q4 2023 to 4.7% year-on-year in Q1 2024, has increased demand for foreign exchange. Despite this, Ghana’s international reserves remain low, covering just 2.5 months of imports as of March 2024. The IMF agreements allowing the exchange rate to adjust to market conditions have also played a role in this scenario.
Fitch Solutions projects that the cedi will regain value by 9.0% by year-end, based on the spot rate as of July 9, 2024.
On July 8, 2024, Ghana reached an agreement with international bondholders to restructure US$13 billion worth of external debt. This process is expected to be concluded by the end of September 2024. Fitch Solutions stated that this restructuring will improve investor sentiment towards Ghana, enhance capital inflows, and apply appreciatory pressure on the cedi.
