Ghana’s currency is facing a lot of pressure as the economy recovers and the demand for the dollar increases.
Although Ghana’s central bank has received a massive injection of dollars, the demand for the dollar has overhauled the supply causing the cedi’s slide.
According to Bloomberg, the Bank of Ghana quadrupled the amount of dollars offered at its forward-rate auction to $75 million on Tuesday, the largest since the auctions began in 2019. At the time of writing this article, the Ghanaian currency dropped to 5.9490 a dollar, indicating a strong bullish momentum of the dollar.
Since May, the currency of the world’s second-largest cocoa producer has declined every month as a rebound in the economy following the outbreak prompted businesses to stockpile dollars to buy products and grow.
According to government projections, the West African nation’s GDP would grow by 5% this year and next. That would be the quickest rate since the beginning of 2019. As imports climbed, the country’s trade surplus shrank to 1.2% of GDP in the first half, down from 1.5% a year earlier.
What this means
The Bank of Ghana has tried to maintain a strong cedi with an increase in dollar supply, but the continued surge in demand for the dollar has overshadowed this inflow.
Currency speculators still project that the cedis would lose more of its value as importers increase their demand due to the fast appropriating festive season.