Ghana’s Cedi Struggles as Economy Remains in Turmoil

• The Ghanaian Cedi is the second worst-performing currency among Sub-Saharan Africa’s top 15 currencies, depreciating by 12.7% in the first 17 days of the new year.
• This depreciation is still lower than that of the whole of 2022 (38.86%), but suggests that the currency’s resurgence in late 2022 has dissipated.
• The Ghanaian government is seeking to stabilize its economy through a $3 billion loan from the International Monetary Fund and a gold-for-oil scheme.

The Ghanaian Cedi has had a turbulent start to the new year, depreciating by 12.7%, according to the latest Bank of Ghana data, with one U.S. dollar now buying around 10.36 units of the local currency. This marks it as the second worst-performing currency among Sub-Saharan Africa’s top 15 currencies, with only the Egyptian pound, which depreciated by 16.5% during the same period, faring worse.

The Cedi had been on an upwards trajectory towards the end of 2022, when one U.S. dollar bought 13.10 units of the cedi on the parallel market, but this revival appears to have been short-lived. While the Cedi’s year-to-date drop is still lower than the whole of 2022 (38.86%), the latest depreciation suggests that the currency’s resurgence has dissipated.

In an effort to stabilize its economy and ease the pressure on its currency, the Ghanaian government has obtained a $3 billion loan from the International Monetary Fund, and has launched a gold-for-oil scheme. However, the success of these initiatives remains to be seen, and the currency’s future hangs in the balance.

The Ghanaian currency’s performance is a reflection of the country’s economic challenges, which have been exacerbated by the coronavirus pandemic. High inflation, coupled with low output, has only added to the Cedi’s woes.

The Bank of Ghana is hoping to stem the tide of the currency’s slide by introducing a number of measures. These include raising the benchmark interest rate and increasing the minimum capital requirement for banks, as well as increasing its foreign exchange reserves.

Ultimately, only time will tell if the Ghanaian Cedi is able to recover from its current slump. In the meantime, the Bank of Ghana is doing its best to ensure that the currency remains stable.