The Cedi has plunged to its lowest level in two decades as corporate demand for dollars to import fuel, pharmaceuticals, and fast-moving consumer goods (FMCG) intensifies.
The currency of the world’s second-largest cocoa producer fell 0.2 percent to GHS 14.9335 per dollar by the close of trading on Monday, marking its weakest point since Bloomberg began recording the data in 1994.
According to Bloomberg, since the start of the year, the cedi has depreciated by 20 percent against the US dollar, making it the fourth worst-performing currency globally, after the Egyptian pound, Nigerian naira, and Lebanese pound.
Samantha Singh-Jami, Africa strategist at Rand Merchant Bank, attributes the cedi’s decline to robust dollar demand from oil importers, the pharmaceutical sector, and FMCG companies.
“Despite recent efforts to bolster foreign exchange reserves, liquidity constraints in the market persist,” she noted.
Ghana’s gross international reserves have risen to $6.6 billion in April, the highest in more than 19 months, according to Bloomberg data. The central bank has been actively managing these reserves to ensure market stability, including direct interventions to meet the foreign exchange needs of certain companies, thereby alleviating the pressure on commercial banks.
Bank of Ghana Governor, Dr Ernest Addison, recently highlighted these measures as part of the country’s broader strategy to maintain market equilibrium.
The accumulation of reserves follows Ghana’s cessation of most external debt servicing since December 2022, a move aimed at qualifying for an International Monetary Fund programme. The $3 billion IMF package, along with additional inflows from multilateral and bilateral sources, has provided critical support for the reserves.
Compounding the currency’s troubles, cocoa export revenues have almost halved in the first four months of the year, dropping 49 percent to $599 million due to a significant decline in output. The projected cocoa production for the 2023-24 season stands between 422,500 and 425,000 tons, a stark reduction from initial estimates.
This slump in revenue from cocoa, a pivotal export for Ghana, has further strained foreign exchange supplies.
“The cedi’s depreciation reflects a mismatch in foreign exchange flows,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank. “Despite a recovery in foreign exchange demand this year, it continues to outpace supply.”
Ghana’s currency woes underscore the broader economic challenges the nation faces as it navigates high dollar demand, constrained liquidity, strategic debt restructuring, and declining export revenues.