NorvanReports Asked ChatGPT About its Cedi Depreciation Projection for 2025, See its Response
The Ghanaian Cedi since December 2022 has experience severe volatility in its value against the dollar following the country’s announcement of default on its external debt obligations in December 2022 and leading to a restructuring of the country’s domestic and external debts.
The restructuring of the debts resulted in the skyrocketing of headline inflation (54%) increasing the cost of living, rising interest rates (30%), a crush in trading in the country’s bond markets, and others largely impacting the macroeconomic stability of the country thereby necessitating the current $3bn programme with the IMF.
The $3bn IMF programme has brought some recovery and stability to the country’s marcoeconomy with inflation reducing from the 54% high in 2022 to the current figure of 23.8% in December 2024.
Interest rates determined by the BoG has also fallen from the 30% high to 27% in November 2024. Also, the country’s $20bn in in domestic and external debts has been restructured.
The value of the Cedi, following the restructuring of the country’s debts in the last two years has depreciated from a single-digit value to the dollar to double-digits value to the dollar, going as far as GHS 17 to a dollar in 2023.
The poor performance and rapid depreciation of the Cedi earned it the unenviable title of the 4th worst performing currency among 150 currencies globally by Bloomberg in June last 2024.
For both 2023 and 2024, the Cedi per data from BoG recorded depreciation rates above 20% against the American greenback.
Below are the tables of depreciation figures of the Cedi for 2023 and 2024.
Table 1: USD/GHC Depreciation Rates (2023)
| Month | Depreciation Rate (%) | Notes | |————-|————————|————————————————| | January | −20.6 | | | February | – | Data not provided in January 2024 report | | March | −22.1 | | | April | – | Data not provided in January 2024 report | | May | −22.0 | | | June | −22.1 | | | July | −22.2 | | | August | −22.9 | | | September | −25.4 | | | October | −26.2 | | | November | −27.8 | | | December | −27.8 | |
Table 2: USD/GHC Depreciation Rates (2024)
| Month | Depreciation Rate (%) | Notes | |————-|————————|————————————————| | January | −1.3 | | | February | – | Data not provided in May and November reports | | March | −7.7 | | | April | −10.5 | | | May | −18.6 | | | June | −20.3 | | | July | −21.8 | | | August | −24.8 | | | September | −27.1 | | | October | −22.7 | | | November | −22.7 | | | December | – | January 2025 report yet to be published |
Question: Given the background of the country’s macroeconomic environment and Cedi performance environment in 2023 and 2024, what is your outlook for the Cedi in 2025.
ChatGPT’s Response:
Outlook for the Ghanaian Cedi in 2025
The performance of the Ghanaian Cedi in 2025 will depend on several key macroeconomic and structural factors influenced by both domestic policies and global conditions. Below is an analysis of the possible outlook:
1. Potential for Stabilization with IMF Programme
The $3 billion IMF programme, which has already shown positive signs of macroeconomic stabilization, is likely to continue anchoring confidence in the economy in 2025. Key achievements, such as reduced inflation (from 54% in 2022 to 23.8% in December 2024) and moderated interest rates (from 30% to 27%), suggest that fiscal discipline and monetary interventions are beginning to yield results. Continued adherence to IMF-backed reforms could stabilize the Cedi further.
2. Debt Restructuring Impact
The restructuring of $20 billion in domestic and external debts has improved debt sustainability, reduced fiscal pressure, and allowed for increased investment in growth-enhancing sectors. However, challenges may persist in the form of investor skepticism and market reactions to further debt repayments. If debt servicing obligations remain manageable, the Cedi could experience reduced depreciation pressures compared to the previous years.
3. Dollar Demand and Trade Performance
Despite the IMF programme, the Cedi’s exchange rate will largely be influenced by Ghana’s dollar reserves and trade performance. The country’s reliance on imports creates sustained demand for dollars, which exerts pressure on the Cedi. If Ghana can boost its export earnings—particularly from gold, cocoa, and oil—this could ease dollar demand and support the currency.
4. Global Economic Trends
The Cedi’s performance will also hinge on global trends, including Federal Reserve policies, dollar strength, and commodity price fluctuations. A stronger US dollar could further weaken the Cedi, while high gold and oil prices could provide some buffer.
5. Persistent Risks
Political risks: With 2024 being an election year, fiscal slippages often associated with elections could spill over into 2025, undermining the Cedi’s performance.
External debt refinancing: If global credit conditions tighten, Ghana could face challenges in refinancing its debt, leading to increased depreciation pressures.
Depreciation Projection for 2025
Given the above factors, the Cedi is expected to depreciate, but likely at a slower pace compared to the severe declines of 2023 and 2024.
Base Case Scenario: With continued IMF reforms, stable inflation, and moderate interest rates, the Cedi could record a year-to-date depreciation of 10-15%.
Pessimistic Scenario: If fiscal discipline weakens, external shocks occur, or dollar demand spikes, depreciation could reach 20-25%.
Optimistic Scenario: If export performance improves significantly and investor confidence returns, depreciation could be limited to below 10%.
Conclusion
While the Ghanaian Cedi’s depreciation is likely to persist in 2025, the extent will depend on the government’s commitment to IMF reforms, improved trade performance, and management of external debt obligations. Strengthening macroeconomic fundamentals and enhancing foreign exchange inflows remain critical to reversing the currency’s prolonged decline.
