The precarious situation of the cedi is not getting any better soon, as the local currency has recorded a -28.82% depreciation to the dollar as of August 8th, 2022, Bloomberg has said.
This still ranked the local currency as the worst among African currencies with the “Worst Spot Returns”, and could be heading for a record in the last 25 years.
The rate of the cedi to the dollar on the retail market is nearly ¢9 to a dollar.
Despite the country benefiting immensely from the high price of crude oil on the international market and to some extent the favorable price of gold, the cedi has not fared well so far this year.
This is due to largely the poor fiscal state of the economy which has compelled S&P Global Ratings to revise Ghana’s credit rating to CCC+, from B-.
Economist and Political Risk Analyst, Dr. Theo Acheampong described the revision of Ghana’s credit rating to CCC+/C by S&P Global Rating as putting the country’s financial landscape into a more precarious situation.
According to him, the government must quickly fast-track the negotiation with the International Monetary Fund to secure an economic programme urgently, in order to bring credibility to the country’s ability to borrow from the international capital markets.
Head of Client Coverage at investment bank, IC Group, Derrick Mensah also said the challenge confronting Ghana is due to both domestic and external pressures.
“All of these factors [Covid-19, Russian-Ukraine war, rising debt, widening deficit] have culminated to what we have today. On top of it when we look at it from an economic point of view, you realize that the deficit [fiscal] situation in Ghana is larger than a lot anticipated”.
“We expected revenue to kick in, we expected expenditure to be better than what it has been so far. But unfortunately, we’ve seen the deficit widen larger than we expected.”
The current challenges have forced investors to liquidate and repatriate their funds, which is putting lots of pressure on the cedi.
Mr. Mensah urged government to seek for help, particularly from the IMF urgently.
Well at this point, any form of help the government or Ghanaians need, I think that we should look at it critically. But I feel that we fully understand the issues that have been facing the economy or the currency all this while.”
Patrick Edem Agama, an Analyst at Republic Securities also told Joy Business that investors have been reducing their exposure to Ghana.
“What we have been seeing is that investors have consistently been reducing their exposure to Ghana. We know that they are expecting this to happen or they’ve been seeing and studying the trend for some time now. That has already been in the market, and we expect government reaction to influence the market.”
Government in a statement through the Finance Ministry today, August 8th, 2022 said it will continue to be proactive in addressing the impact of external and domestic headwinds on the economy and on the lives and livelihoods of Ghanaians.
It added that government has implemented key revenue and expenditure measures, including the 30% cut in discretionary expenditures, adding, “the government is committed and is confident that it will successfully emerge from these challenges in the shortest possible time as we have demonstrated the track record to do so in the Akufo-Addo led government”.
Cedi troubles yet to be over; loses about 7% value to dollar in July
Some analysts had earlier told Joy Business that the cedi’s trouble will not be over soon, as it will only stabilise in the 4th quarter of this year.