Cedi ranked world’s second-worst performing currency in 2023
The cedi, is currently facing a period of significant instability and volatility. In fact, it has earned the ‘distinction’ of being the second-worst performing currency in the world this year, losing a staggering 21% of its value against the US dollar. This dismal performance places it second only to the beleaguered Lebanese pound in terms of worst-performing currencies globally, and the outlook for the cedi is far from positive.
This negative forecast is a result of Ghana’s failure to meet its own deadline to restructure its bilateral debt and come closer to tapping foreign aid. This development has significantly eroded investor confidence in the country, leading to the current depreciation of the cedi. The self-imposed deadline was an essential element of Ghana’s plan to reduce its external debt, which had been increasing at an alarming rate, and to secure the much-needed foreign aid to support its economy.
Economists in the country have expressed concerns that the cedi’s volatility will continue until there is a substantial breakthrough on the external debt restructuring front. Kweku Arkoh-Koomson, an economist at Databank Group, highlights that the International Monetary Fund (IMF) deal is what will bring about clear stability in the cedi. The IMF deal is seen as critical to unlocking the much-needed foreign aid to support Ghana’s economy and address its current debt crisis.
However, there is a sense of uncertainty surrounding when the rest of the debt restructuring will be completed, and this is contributing to the volatility of the cedi. According to Courage Boti, an economist at GCB Capital Ltd, the uncertainty surrounding the timeline for the debt restructuring is impacting investor confidence in Ghana. As timelines are not very clear, the volatility of the cedi will continue to increase.
In addition to the lack of progress on the external debt restructuring front, Ghana is also facing significant economic challenges, including high inflation rates, rising unemployment, and low foreign exchange reserves. These factors have put further pressure on the cedi, exacerbating its volatility.
Overall, the outlook for the cedi is bleak, and the government must take swift and decisive action to address the country’s economic challenges. There is a pressing need to restore investor confidence in the country, which can be achieved through successful debt restructuring and securing a favorable IMF deal. Failure to address these issues could lead to further depreciation of the cedi and continued economic instability in Ghana.
