Ghana: Cedi Depreciation Risks Persist Despite Improved Performance

7 September 2022

Despite an improved performance of the cedi to the dollar last week, depreciation risks persist.

According to the Weekly Currency Report by Databank Research, demand pressures exist.

"We reckon the improved Foreign Exchange (FX) supply to cushion the Ghana cedi. Depreciation risks persist with demand pressures still sustained, but we expect these pressures to ease when the $1.3 billion COCOBOD syndicated loan comes through," it said.

The cedi gained 2.02 per cent against the dollar, 2.98 per cent against the pound, and 1.52 per cent against the euro, trimming its Year-To-Date loss to 34.38 per cent(September 2, 2022) against the American currency.

This was on the back of the $750 million Afrexim loan bolstering foreign exchange (FX) supply.

"The local unit strengthened against the greenback last week on the back of the $750 million Afrexim loan bolstering FX supply. Last week, the Bank of Ghana conducted a forex auction for the BDCs (Bulk Oil Distribution Companies), allotting $50 million at a 30-day forward rate of 9.7554/US dollar (vs 8.8192/US dollar in the previous auction)".

It is however unclear whether the trend will continue this week. Despite the demand pressures, the report pointed out that improved FX supply will cushion the cedi.

Again, it expects these pressures to ease when the $1.3 billion COCOBOD syndicated loan comes through next month.

Meanwhile, the local currency is still ranked among the worst performing currencies in the Sub Saharan Africa region.

However, the Zambian kwacha has appreciated by 8.07 per cent to the dollar since January 1, 2022.

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