• Ghana cedi

 The cedi is expected to weaken further over the coming months, a report from Fitch Solutions Country Risk and Industry Research, has revealed.

In the year to date (Au­gust 30 2022), the cedi had depreciated sharply, having lost 38.1 per cent of its val­ue against the US dollar.

“This is caused by in­creased demand for the dollar following tighter monetary pol­icy in the US and rapidly growing investor concerns around Ghana’s fiscal and external health,” the November edition of the re­port on the outlook of the cedi said.

As of August, the cedi was third worst-performing currency globally, after Sri Lanka’s rupee and Zimbabwe’s dollar.

The report said Ghana’s deteri­orating fiscal and balance of pay­ment dynamics had effectively cut the country off from international capital markets since Q421, which had seen bond yields rise to 23.36 per cent from 10.51 per cent at the start of the year.

Additionally, credit rating agen­cies S&P, Fitch Ratings and Moody’s decided to downgrade the country’s sovereign ratings in early 2022, with the former two having downgraded Ghana again in August 2022.

According to Fitch, these de­velopments had further eroded investor confidence and had put additional downside pressure on the exchange rate.

“Although we expect that the cedi will remain on a depreciatory trajectory in the immediate term, the outlook depends on whether Ghana will reach an agreement with the International Monetary Fund (IMF) and obtain funding in the months ahead,” the report said.

In July 2022, President Nana Akufo-Addo announced that he had instructed the Finance Minister, Ken Ofori Atta, to start negotiations with the IMF as part of broader efforts to ‘quicken Ghana’s build back’.

“While we believe that the two parties will reach a deal in Q422, there are downside risks to this view, which would have negative implications for the cedi,” the report said.