Fitch Solutions Forecasts Cedi Recovery to Mitigate Inflationary Risks Before Year-End
Fitch Solutions, the research arm of Fitch Ratings, says it expects the cedi to reverse some of the losses it has made this year.
The reduction in losses of the cedi against the greenback, Fitch Solutions asserts, will limit upside inflationary risks thereby moderating inflation in the coming months to 22.1% and 16.2% by end-2024 and end-2025 respectively.
Additionally, the research agency expects anticipate investor sentiment towards Ghana to improve post-debt restructuring leading to stronger demand for the cedi.
“We expect that the cedi will start paring back some of the losses it incurred so far in 2024 which will limit upside inflationary risks. Indeed, Ghana started the restructuring of its eurobonds in June and will likely conclude the process in September. Post-restructuring, we anticipate investor sentiment towards Ghana to improve, leading to stronger demand for the cedi,” quipped Fitch Solutions.
The cedi as of July 19, 2024, per Central Bank data was trading at 14.7811 to the dollar, marking a substantial 19.6% depreciation since the beginning of the year.
This represents a significant weakening from the exchange rate of 11.0034 recorded in July 2023, underscoring the persistent challenges facing Ghana’s currency.
The Cedi’s performance against other major currencies has been similarly weak. Against the British pound, the cedi has depreciated by 20.8% year-to-date, trading at 19.1009. The Euro has also gained ground, with the cedi falling 18.4% since the start of the year to 16.0938.
Finance Minister Dr. Mohammed Amin Adam has stated that the Ministry of Finance is working with the Bank of Ghana to implement measures to address the depreciation of the local currency.
These measures, he posited, include fast-tracking the fiscal consolidation process through rationalizing spending and enhancing revenue mobilization; intensification of the gold-for-oil programme, and the appropriate foreign exchange interventions by the Bank of Ghana.
Others include the intensification of the gold for reserve programme; the disbursement of the 3rd tranche under the 2nd Review of the International Monetary Fund-supported PC-PEG after the IMF Executive Board approval in June 2024; the disbursement from other ongoing projects including the $150 million World Bank loan and the expected disbursement of $300 million under the World Bank DPO2.
