Cedi depreciates 74% to dollar in past 3 years – IEA
The Ghana cedi has depreciated by approximately 74% against the US dollar over the past three years, as revealed by the Institute of Economic Affairs (IEA).
Specifically, the local currency saw a 30.0% decline in 2022, followed by a 27.8% drop in 2023, and has lost nearly 29% so far in 2024. The IEA considers this a significant depreciation, cautioning that the cedi may face further pressure throughout the year due to several factors.
Firstly, the upcoming election has created uncertainty, prompting investors to hold dollars as a safe haven. Additionally, concerns about the future of Ghana’s International Monetary Fund (IMF) program, given the election’s uncertain outcome and potential policy shifts by a new administration, could drive higher demand for dollars.
The IEA also highlighted unresolved debt negotiations with non-Eurobond commercial creditors, which may delay further IMF program disbursements and associated inflows, potentially reducing foreign exchange availability.
The IEA pointed to Finance Minister Dr. Mohammed Amin Adam’s recent statement that the IMF Board will conduct the third review of Ghana’s program on December 2, 2024, noting that this timing seems delayed, as IMF staff completed their own review in early October. Moreover, a weaker cocoa crop and COCOBOD’s shift to domestic financing, along with limited syndicated loans, could further constrain foreign exchange supplies. The IEA cautioned that addressing these challenges will require sustained efforts to balance the foreign exchange supply-demand gap, with long-term stability dependent on structural and macroeconomic reforms beyond the election period.
