Cedi projected to end 2022 at GHS 7.87 to the dollar
The cedi has been projected to end this year with an exchange rate of GHS 7.87 to the dollar.
This is per the new report assessing the country’s economy by the London-based Economist Intelligence Unit (EIU).
The projected depreciation of the local currency against the dollar for the next eight months of this year, according to the EIU, will be influenced by the import structure of the economy and some actions of the offshore investors in Ghana’s bonds.
The cedi weakened sharply in the first two months of 2022, reflecting increased demand for hard currency due to a strengthening in Ghana’s (structurally import-dependent) business activity and profit repatriation by Ghana-based multinationals.
In a bid to stabilise the cedi, the Bank of Ghana announced foreign-exchange interventions, with $450m to be released via foreign-exchange forward auctions in the first quarter of 2022. As of early March, some $300m had been released.
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The Unit said some further tightening by the Money Policy Committee of the Bank was needed to supply-side price pressures – including high utility and food prices, new taxes, rising global commodity prices and heightened freight charges, alongside supply-chain disruptions due to the Ukraine conflict, which are likely to keep inflation (especially fuel costs) elevated in 2022.
“We expect the headline inflation rate to remain high (averaging about 15%) throughout early 2022, driven by supply-side price pressures, including rising global oil and food prices—exacerbated by logistical bottlenecks related to the Russia-Ukraine war.—and high utility and transport costs,” said the EIU.
Average inflation will rise from 10% in 2021 to 13.4% in 2022 as prices for global commodities continue to increase, domestic demand starts to pick up further, and the currency depreciates sharply.
Inflation is forecast to average 8.8% in 2023-26, falling towards the lower end of the year.
This will reflect monetary tightening and weakening supply-side price pressures as the forecast period progresses, in part offset by ongoing local-currency depreciation.
