The Ghanaian currency has been rated among the most stable currencies on the African Continent.
The rating by Fitch Solutions, research arm of Fitch Ratings, in its April 2021 Africa Fiscal Monitor Report, is on the back of a moderate 4.6 percent depreciation of the cedi (official data from BoG puts it at 3.9 percent) in 2020 compared to other strong currencies such as the Nigerian naira which depreciated by 8 percent and the Kenyan shilling which also depreciated by 7.9 percent last year.
“The cedi was among the most stable Sub-Saharan African currencies in 2020, depreciating by a fairly moderate 4.6% over the year – compared to 7.9% for the Kenyan shilling and 8.0% for the Nigerian naira – largely as a result of interventions by the Bank of Ghana (BoG),” stated Fitch Solutions.
The Cedi begun this year on a sound footing, appreciating against the dollar by some 1.1 percentage points in January this year. It however, maintained a modest appreciation of 0.6 percentage points at the end of the first quarter 2020.
Quarter one performance of African best currencies to US dollar
Ghana cedi 0.55%
Egyptian pound 0.18%
Nigerian naira 0.00%
Tanzania shilling 0.00%
Kenya shilling -0.31%
Fitch Solutions in its report, posits that it expects the cedi in the coming quarters to remain stable against the American dollar hovering around Ghs 5.80 pesewas on the back some 11.1 percentage points increment in the country’s Gross International Reserves (GIR) for this year.
Adding that, although dollar demand from importers will rise during the year, amid a general improvement in economic conditions, the increase – and the resulting pressure on the cedi – is likely to be relatively muted in the first half of the year.
The 11.1 percent increment in the country’s GIR, Fitch Solutions projected will result in an $8.8 billion reserves amounting to about 4.5 months import cover for the country.
The increase in the reserves, it notes, is as a result of robust global growth which has triggered demand for Ghana’s export commodities including oil, gold and cocoa.
“The BoG maintains adequate foreign reserves to continue its managed float policy in the coming quarters. We expect gross reserves to rise by 11.1% in 2021 to an average of US$8.8bn (or 4.5 months of import cover, compared to an estimated 4.2 in 2020) as robust global growth bolsters demand for Ghana’s export commodities such as oil, gold and cocoa,” the report stated.
Data from the Central Bank puts the country’s GIR at end-February 2021 at $8.71 billion, providing imports cover for 4.2 months.
