AfDB pegs 2022 cedi depreciation against dollar at 33%
Depreciation of the local currency against the greenback, was 33% last year according to the 2023 Africa Macroeconomic Performance and Outlook report by the African Development Bank (AfDB).
According to the AfDB, tighter global financial conditions destabilised the country’s foreign exchange market causing the local currency to lose substantial value against its anchor currency.
“Tighter global financial conditions put pressure on African domestic currencies, raising the risk from already high inflation, The tighter global financial conditions destabilized the foreign exchange markets of most African countries, but the dynamics were mixed.
“Most African currencies, especially in commodity-exporting countries, lost substantial value against the US dollar in 2022 due to monetary policy tightening in the United States. Depreciation rates ranged from 21 percent in Malawi to 24 percent in Sierra Leone to 33 percent in Ghana to 69 percent in South Sudan. Other African currencies appreciated, including 29 percent in Angola, 16 percent in Seychelles, and 14 percent in Zambia,” stated the multilateral lender.
The cedi’s depreciation rate against the dollar according to the AfDB, is however, anticipated to slow this year and in 2024.
According to UK based Economist Intelligence Unit (EIU), the cedi is anticipated to record a 22% depreciation rate against the dollar in 2023.
This will rank the local currency as the 3rd weakest performing currency on the African continent, according to its Africa Outlook 2023 Report.
The EIU expects the exchange-rate weakness to continue into 2023, albeit to a lesser degree.
“Most African currencies have lost substantial value against the US dollar during 2022 and we expect exchange-rate weakness to continue into 2023, albeit to a lesser degree”.
It maintained that the currencies of the troubled states of Sudan and Zimbabwe will be among the weakest in the world during 2023, while Ghana, Malawi, Sierra Leone, Ethiopia and Egypt – which will all suffer from elevated rates of inflation – will see their currencies depreciate by more than 10% against the US dollar.
Ghana’s economy grows 3.6% in 2022; weighed down by macroeconomic imbalances
Meanwhile, the AfDB has reported that Ghana’s economy expanded by 3.6% in 2022, a slight decrease from 5.4% in 2021.
This is slightly lower than the 3.7% forecast by the Government of Ghana and 3.8% by the World Bank.
The AfDB attributes the decrease in growth to deep macroeconomic imbalances, including higher inflation, a depreciating local currency, and high public debt, which is estimated to be 91% of Gross Domestic Product.
The bank projects a growth rate of 3.3% for the Ghanaian economy in 2023, which is higher than the Government of Ghana’s forecast of 2.8%, the World Bank’s 2.7% and the International Monetary Fund’s 2.8%.
It is worth noting that the growth projection for 2023 is still subject to considerable uncertainty, and it depends on the government’s ability to address the deep macroeconomic imbalances.
