Bloomberg, a prominent financial and media company, has forecasted a further depreciation of the Ghanaian cedi, projecting it to reach a value of GH¢15.98 against the dollar by the 2024 year-end. This estimate stands in stark contrast to Fitch’s prediction of GH¢12.25, as outlined in its April report.
The cedi’s value has already experienced a significant decline, with the dollar selling for GH¢14.60 on the retail market before noon today 10 May 2024, as posted on the website of the Ghana Association of Forex Bureaux, marking a depreciation of over 14% since the beginning of the year.
Bloomberg explained that its “forward pricing is calculated based on the spot rate and the interest rate differentials between the two currencies for the tenor of the forward”. The financial and media company has also reported that the Cedi has seen its longest period of weakness against the dollar. The local currency has not gained against the dollar in the last 22 trading sessions, “the longest streak according to data compiled by Bloomberg going back to 1994”.
The depreciation of the cedi has been attributed to a shortage in dollar supply to meet the surging demand.
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Bloomberg blames the decline in dollar supply on “a slump in cocoa earnings, with exports dropping by nearly a third to $508 million in the first two months of the year due to adverse weather, disease and fertilizer shortages”.
On the other hand, currency analysts, interviewed by The Accra Times, link the heightened demand for the dollar to corporate requirements such as repatriating profits, paying dividends to foreign shareholders, and servicing external loans.
On the Ghana Interbank Forex market, the dollar commenced trading today at GH¢14.20 for bids and GH¢14.35 for offers.
“Noticeably, the spot market was very quiet so far this week due to USD illiquidity. This pushed the pair to today’s present pricing”, Kodzo Dziwornu Letsa Forex Trade Analyst told The Accra Times.
The continued weakening of the cedi carries significant implications for the cost of living in Ghana. It is anticipated to further lead to an increase in the prices of petroleum products, utility tariffs, and other goods and services, potentially reversing the slight drop in the inflation rate of 25% recorded in April this year.
