Cedi to bounce back

–To $12.25 by end of year – Fitch Solutions

By Elvis DARKO, Accra

Fitch Solutions, an international credit ratings agency, has projected that the Ghanaian cedi will bounce back to an appreciating trajectory very soon.

It expects that the cedi would recoup some of its recent losses in the months ahead, ending the year at $12.25.

The ratings agency said factors, notably the progress the government had made regarding the restructuring of its commercial debt, would strengthen the cedi.

The rating agency expects that the progress made would boost investor confidence in Ghana’s economy and policymaking processes, leading to increased foreign exchange inflows and a consequent strengthening of the cedi in the second half of 2024.

According to the rating agency, the currency had depreciated by 11% against the US dollar so far this year on the retail market.

It also noted that the depreciation was coupled with worsening reserves, which occasioned low import cover.

“Indeed, the cedi has been on a rapid depreciatory trend since February 2024, caused by investor concerns over Ghana’s progress of restructuring its commercial debt, as well as the sustained strength of the US dollar.

“Moreover, Ghana’s international reserves remain low, covering just 2.7 months of imports in February, which restricts the Bank of Ghana’s capacity to effectively intervene in the foreign exchange market,” it added.

Forex trading yesterday

At the end of trading yesterday, the Cedi depreciated against the US dollar and Euro by 0.10% and 0.07% respectively but appreciated by 0.28% against the Pound Sterling. 

The Cedi closed the week trading at midrates of GH₵13.06 to one dollar GH₵16.12 to one Pound Sterling and GH₵13.90 to the Euro.

However, the dollar was bought at GH₵13.60 and sold at 13.95 at some forex bureaus in Accra.

Against the Pound Sterling, the cedi traded at a buying price of GH₵16.13 and sold for GH₵16.17.

For the Euro, it traded at GH₵13.89 for buying and GH₵13.90 for selling.

Ghana is set to receive another $360 million in June from the International Monetary Fund (IMF) as the third tranche under the bailout programme.

The Bank of Ghana (BoG) had given an assurance that the central bank has strong buffers to support the Cedi in spite of the local currency depreciating by 6.8 per cent in the first quarter of the year.

$6.2bn gross international reserves

With the gross international reserves increasing to $6.2 billion at the end of February this year, BoG said it had enough buffers to support the recovery of the local currency.

During the 117th sitting of the Monetary Policy Committee (MPC), BoG the depreciation of the Cedi in the first quarter was as a result of some seasonal pressures in February and early March 2024.

The regulator noted that the pressures are being mitigated by continued inflows from remittances and mining companies as well as from the Domestic Gold Purchase Programme

BoG to auction $120m

BoG plans to auction $120 million to Bulk Oil Distribution Companies (BDCs) this quarter.

The amount to be auction is the same as the first quarter of 2024.

According to its Forex Forward Auction Calendar, $40 million will be sold to the BDCs in each month of quarter two, 2024.

In April 2024, the Central Bank will auction $20 million each to the BDCs.

In May 2024, the Central Bank will sell $20 million ach to the BDCs.

Two auctions will take place on May 14, 2024, and May 29, 2024.