Bloomberg describes Cedi as the world’s worst performing currency

Bloomberg describes Cedi as the world’s worst performing currency

The Ghanaian Cedi has been classified as the worst-performing currency across the globe by Bloomberg.

The classification follows a recent currency performance ranking by Bloomberg.

Bloomberg tracked the performance of 150 currencies in the world and the Cedi placed last in terms of performance since the beginning of the year.

In less than 8 months, the Cedi has come under intense exchange rate pressure due to its continuous depreciation to some major international currencies such as the Dollar, Pound and Euro.

According to data put out by the Bank of Ghana, the Cedi began the year at $1.00 to GHS6.02.

Just a month ago, one could exchange $1.00 for GHS 7.43, and in less than 20 days, traders needed an average of GHS 9.37 to buy $1.00.

This means the Cedi has lost most than GHS 3.30 of its value to the dollar in less than 8 months.

To address the exchange rate problems, the Monetary Policy Committee is expected to meet today to “review recent developments in the economy,” according to a statement released by Bank of Ghana.

That’s after it left borrowing costs unchanged at 19% last month on expectations that inflation may be leveling off and to allow a cumulative 550 basis points of rate hikes since November to filter through the economy.

The central bank is the second in sub-Saharan Africa after the Bank of Uganda to hold an emergency meeting since Russia’s war with Ukraine erupted in February.

Cedi depreciation to inflate external debt-to-GDP ratio to 78.5%

Meanwhile, the continuous decline in the value of the local currency (cedi) against its anchor currency (dollar), is expected to inflate the value of the country’s external debt.

In a recent report by Fitch Solutions on the economy, Fitch Solutions asserts that Ghana’s external debt as a percentage of GDP is expected to increase to 78.5%.

The projected increment is from the estimated external debt-to-GDP ratio of 50.5% at end-2021, from the previous external debt-to-GDP ratio of 37.1% in 2017.

The cedi has lost roughly 30% of its value against the dollar since the beginning of this year.

“As a result of increased borrowing on international capital markets in recent years, Ghana’s total external debt stock has risen from 37.1% of GDP in 2017 to an estimated 50.5% of GDP in 2021. With most of Ghana’s debt denominated in foreign currency, the sell-off of the cedi – which lost roughly 30.0% of its value against the USD year-to-date (August 2022) – will inflate the external debt-to-GDP ratio to a projected 78.5% in 2022.

“We expect external borrowing to continue, further increasing already high interest payments over 2022 and causing the primary income deficit to widen to a forecast 8.2% of GDP, from 4.8% in 2021,” said Fitch Solutions .