Analysts attribute Cedi’s resurgence to improved dollar supply, external debt service suspension
The Ghanaian cedi has witnessed a significant boost in value against the US dollar, pound, and euro this week, with the local currency trading at ¢12.60 to one US dollar in the forex market. This marks a 3% increase in value compared to last week, when the cedi depreciated by about 1.98% against the greenback.
Despite this recent improvement, the year-to-date loss to the dollar still stands at around 18%, as the cedi experienced a steep decline of almost 19% in January 2023 alone. According to the Bank of Ghana, however, the cedi remained relatively stable throughout February.
Analysts attribute the recent resurgence of the Ghanaian cedi to several factors, including an improvement in dollar supply and the suspension of external debt service. The latter measure has reportedly helped to ease the pressure on foreign exchange supply, as the country is no longer servicing most of its external debt. For example, the January 18, 2023 Eurobond coupon of $41 million was not paid.
“This external debt service suspension is easing the pressure and making the FX available for other purposes although still on a knife’s edge supply”, a currency analyst told Joy Business via email.
In addition to this, yields on T-bills have remained elevated in recent months, which has reduced investor appetite for the dollar. Moreover, the ban on the sale of foreign exchange to importers of certain goods that the Ghanaian government has deemed as “non-essential items” has contributed to the cedi’s improved performance.
It is worth noting that the cedi’s recent surge in value comes after a period of sharp depreciation, which prompted the Bank of Ghana to intervene by selling dollars to help stabilize the currency. The cedi’s recent stability is a welcome development, particularly for importers and businesses that rely on foreign exchange to conduct their operations.
On the interbank market, the Bank of Ghana quoted one dollar to ¢11.01, which indicates that the cedi has gained some ground in the official forex market as well. This recent improvement in the cedi’s performance is expected to boost investor confidence and attract foreign investment to the country, which could help to further strengthen the local currency.
The Ghanaian cedi’s recent resurgence against major foreign currencies is a positive development that bodes well for the country’s economy. With the external debt service suspension and elevated T-bill yields likely to continue in the near term, the cedi could continue to strengthen in value and provide some much-needed relief to importers and businesses in Ghana.