Ghana’s Money Woes: Cedi Can’t Catch a Break Against the Mighty Dollar
- From Powerhouse to Poorhouse? Cedi’s Slump Has Ghanaians Clutching Their Wallets
The Ghanaian cedi has continued its downward trajectory against major currencies, particularly the US dollar, according to the latest data from the Bank of Ghana, raising concerns about inflationary pressures and economic stability.
As of July 19, 2024, the cedi 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.
This continued depreciation comes despite efforts by the Bank of Ghana to stabilize the currency. The central bank has maintained a relatively high monetary policy rate of 29%, unchanged since February 2024, in part to help shore up the cedi.
“The persistent weakness of the cedi reflects ongoing macroeconomic challenges,” A Currency Expert said to NorvanReports when contacted. “While we’ve seen some improvement in inflation and exports, the currency’s performance indicates that investor confidence remains fragile.”
Indeed, the latest data shows that year-on-year inflation, while moderating, remains high at 22.8% in June 2024. This combination of high inflation and a weakening currency poses significant challenges for businesses and consumers alike.
The impact on imports is particularly concerning. Ghana, heavily reliant on imports for many consumer and capital goods, faces increasing costs as the cedi loses value. This could potentially feed back into higher inflation, creating a vicious cycle.
On the flip side, the weaker cedi could provide some boost to exports, which have shown some growth. Total exports for the first half of 2024 stood at $9.23 billion, up from $8.14 billion in the same period of 2023.
However, the country’s external position remains precarious. Gross international reserves stood at $6.87 billion in June 2024, providing just 3.1 months of import cover, a thin buffer against external shocks.
The government and the central bank face a delicate balancing act in the months ahead. While a stable currency is crucial for economic stability and investor confidence, overly aggressive measures to defend the cedi could risk stifling economic growth.
As Ghana continues to implement its economic recovery program, the performance of the cedi will be a key indicator to watch. The ability to stabilize the currency could prove crucial in restoring investor confidence and setting the stage for sustainable economic growt
