Cedi records 4.7% depreciation rate against the greenback

Cedi records 4.7% depreciation rate against the greenback

The Ghana cedi has depreciated by 4.70% to the US dollar with only 45 days into the year as pressure mounts on the local currency.

This ranks it the second worst performing currency in Africa, among 15 top performing currencies.

The Zambian kwacha which was one of the top performing currencies in Africa in 2021, surprisingly, is the worst so far this year. It has declined in value by 11.29% to the dollar.

Analysts have attributed the cedi’s problem to upside risks to the economy including high debt and interest payments, inadequate revenue and rising expenditure.

This has led to selling pressures by investors in Ghana’s international bonds and the lack of access to the international capital markets.

To this end, credit rating agencies, Moody’s and Fitch reviewed Ghana’s credit worthiness downwards.

The revised credit rating has however complicated Ghana’s capacity to borrow from the international bond market, whilst paying higher interest or premium on existing bonds to investors.

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Meanwhile, the conditions that triggered the persistent depreciation of the cedi during the latter part of last year – 2021 – is expected to  persist till the end of the first half of 2022, a Databank Research has projected.

The local currency, it said, remains vulnerable to foreign portfolio outflows amidst the elevated import demand.

The heightened uncertainty around Ghana’s fiscal outlook worsened the local currency’s woes in the latter part of 2021.

“We expect these conditions to persist in first-half of 2022 in addition to corporate import demand as Ghana’s economy rebounds”, it said.

Again, the low prospect of an early-2022 Treasury issuance on the international capital market also exposes the cedi to depreciation pressure in the first half of this year.

Top performing currencies in Africa: