London-based financial analysis firm, Fitch Solutions has projected a 9% recovery in the value of the Ghanaian cedi against the US dollar by the end of 2024.
This forecast comes amidst challenging conditions for the cedi, which has depreciated by approximately 20% so far this year, making it one of the worst-performing currencies globally.
Factors contributing to the cedi’s decline include weak capital inflows due to subdued market sentiment and ongoing debt restructuring negotiations.
However, Fitch Solutions anticipates improved performance in the second half of 2024, supported by an economic recovery.
In an article titled “Sub-Saharan Africa Currency Round-Up: Greater Stability Ahead in Second Half of 2024,” it is predicted that external conditions will provide more support to Sub-Saharan African currencies in the coming quarters.
Ghana‘s real GDP growth accelerated from 3.8% in Q4 2023 to 4.7% year-on-year in Q1 2024, which has bolstered demand for foreign exchange.
Despite these challenges, Ghana’s recent agreement with international bondholders to restructure $13 billion of external debt, expected to conclude by September 2024, is seen as a positive development.
“We expect the Ghanaian cedi to fare better in H2 [second-half of 2024]. In the year to date, the cedi has lost 19.2% of its value against the US dollar, positioning it among the worst performing currencies globally. Subdued market sentiment amid debt restructuring negotiations has kept capital inflows weak, while the start of an economic recovery – real GDP growth accelerated from 3.8% in Q4 [quarter 4] 2023 to 4.7% year-on-year in quarter 1 2024 – has increased demand for foreign exchange.”
Fitch Solutions highlights that Ghana’s international reserves, covering just 2.5 months of imports as of March, and IMF agreements allowing market-driven exchange rate adjustments have limited foreign exchange interventions by the Bank of Ghana this year.
“Furthermore, Ghana’s international reserves have remained low, covering just 2.5 months of imports in March. Combined with IMF [International Monetary Fund] agreements to allow the exchange rate to adjust to market conditions, this has led to limited foreign exchange intervention by the Bank of Ghana in the year-to-date”, it added.