The Ghana cedi has lost about 74% of its value against the dollar over the past 3 years, the Institute of Economic Affairs has disclosed.
The local currency depreciated by 30.0% in 2022 and 27.8% in 2023. It has so far in 2024 lost almost 29% to the American greenback.
According to the IEA, “this is a huge depreciation by all standards”.
It added that the cedi faces further risks for the rest of the year for a number of reasons.
The first is election uncertainties that makes the dollar holdings as a safe haven.
The second is uncertainties about the future of the International Monetary Fund programme in the face of the uncertain outcome of the elections and the possible intentions of the new administration, which would increase demand for dollars.
The third relates to uncerataities about debt negotiations with non-Eurobond commercial creditors, which could delay further disbursements under the IMF programme and associated inflows and, thereby, reduce FX supply in the economy.
“Indeed, the Minister of Finance [ Dr. Mohammed Amin Adam] has announced that the IMF Board will carry out the third review of Ghana’s programme on December 2, 2024. This seems quite belated since staff completed their own review in early October [2024]”, the IEA added.
The fourth is a subdued cocoa crop coupled with possible availability of limited syndicated loan in the face of COCOBOD’s expressed intention to shift to domestic financing of the crop.
Beyond the elections, the IEA warned it will require strong efforts to bridge the perennial foreign exchange supply-demand gap through structural and macroeconomic reforms in order to achieve lasting exchange rate stability.
