This has raised concerns among investors that the government will need to restructure its debt to qualify for assistance of up to $3bn and created additional uncertainty for domestic bondholders. The Ministry of Finance said in late September that it had started discussions with the IMF for a financing programme, which would “require a comprehensive Debt Sustainability Analysis (DSA)”. Inflation climbed further in September, reaching 37.2%. And oil and gas imports almost doubled to $3.1bn from $1.7bn a year earlier. However, lower sales and prices reduced cocoa exports by 22.8% to $1.7bn. The value of crude oil exports climbed by 56.5% to $3.8bn on higher prices and gold exports rose by 23.9% to $4.2bn on higher production in response to a tax cut. Total exports increased by 19.5% year-on-year ( YOY) to $11.8bn. The country’s trade surplus at the end of August was $1.7bn, up from $892.4m in August 2021. Ghana’s inflation rate accelerated to 33.9% in August, up from 31.7% in July and 29.8% in June. The MPC raised interest rates by 250 basis points (bps) to a record high of 24.5% in an attempt to tackle soaring inflation. The effect of these factors has been exacerbated by the strength of the US dollar, resulting in depreciation of the local currency from the beginning of the year-to-date,” the bank stated. “The depreciation of the currency was driven by higher crude oil product import bill on the back of rising prices, non-roll over of maturing bonds by non-resident investors, portfolio reversals and sudden exit of non-resident investors in the bond market, as well as loss of market access to Eurobond resources. The Bank of Ghana, the country’s central bank, noted in its latest monetary policy committee (MPC) statement on 6 October that up to September, the cedi had declined 37.5% against the dollar in 2022, 24.1% against the British pound sterling and 27.5% against the euro. USD/GHS reached 10.00 at the end of August and 10.41 at the end of September. In August 2022, global ratings agencies S&P Global and Fitch Ratings downgraded their outlook for the Ghanaian economy, which further weighed on investor sentiment and exerted additional downward pressure on the exchange rate. The USD/GHS pair moved above 8.00 in July. Emerging markets have seen a jump in capital outflows since the start of the war in Ukraine as investors have become more risk averse and sought safe haven in assets such as the USD. The USD/GHS exchange rate started 2022 at 6.15 and moved above 7.00 in March, following the Russian invasion of Ukraine and as the US Federal Reserve ( Fed) began raising interest rates. The cedi retreated slightly from the gains in March 2020, remained relatively stable between 5.00 to 6.00 to the dollar until this year’s underperformance. In 2020, the cedi was the best performing currency against the dollar at the start of the year, gaining 7.3% by mid-February. Try demo Cedi plunges on economic pressures In addition to being the world’s second largest cocoa producer, Ghana also exports crude oil and gold. Like other emerging market currencies, the cedi’s value is driven by the country’s trade balance, foreign currency reserves, gross domestic product ( GDP) growth and monetary policy, as well as foreign investment flows and commodity prices. Over the past 15 years it has lost more than 90% of its value. The Ghana cedi was introduced at a rate of 1:10,000, becoming the highest-denominated currency in Africa. The new cedi was introduced after a coup in 1967 and re-denominated in 2007 after decades of high inflation had devalued the currency. The cedi was introduced after the country left the British pound ( GBP) system in 1965. The Ghanaian cedi is the official currency of the Republic of Ghana. What drives the value of the Ghanaian cedi? What is the outlook for the currency of the world’s second largest cocoa producer? We look at the drivers for the cedi’s value and forecasts for its future performance. Rising fuel prices sparked protests on 19 October, led by the Ghana Union of Traders Association (GUTA). The Ghanaian government has been forced to seek assistance from the International Monetary Fund ( IMF) as it faces soaring inflation, high debt, rapidly rising interest rates abroad and falling prices for cocoa – one of its major exports. Over 25% of that loss has come in October alone as the decline in the cedi has accelerated at its sharpest rate since it was re-denominated 15 years ago. The value of the Ghanaian cedi ( GHS) has fallen 56% this year against the US dollar (USD) to become the world’s worst performing currency. The Ghanian cedi was introduced after the country left the British pound system in 1965 Photo: Maksym Kapliuk / Shutterstock
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