Ghanaian Cedi drops by a whopping 30% against the US dollar in 6 months

The Ghanaian cedi has lost 30.56% against the US dollar in 6months. The drop in the Cedi comes despite Ghana’s central bank’s hawkish stance to stamp out inflation.

As the dollar index (DXY) maintains its bullish momentum, the Cedi seems to be heading in the opposite direction. At the time of writing this article, the USD/GHS up 30.56% (YTD) to trade a 7.89 Cedi.

At a time when Ghana is facing economic disruptions caused by the Russian-Ukraine war, a stronger US dollar supported by hikes in US interest rates would only accelerate  the depreciation.

Nonetheless, Minister for Finance, Ken Ofori-Atta has assured that government remains committed to implementing measures to address the perennial depreciation of the Ghana cedi against its major trading partners.

What you should know

• According to the Ofori-Atta , the government has so far implemented a 30% cut in expenditures as part of measures to reduce the fiscal deficit noting that this is geared toward helping reduce the pressures on the exchange rate.
• The Bank of Ghana increased its primary lending rate by 250 basis points to 17%, signalling a tough stance against rising prices for everything from flour to sugar and  fuel, as well as a weakening local currency that has harmed investor confidence
• The Russia- Ukraine crisis has significantly affected Ghana’s exchange rate, construction and agriculture sectors, as well as international trade.
• Ghana has asked International Monetary Fund (IMF) for as much as $1.5 billion in a quest to strengthen its finances and regain access to international capital markets.
• Until now, Ghana, the continent’s second-biggest gold producer, had refused to seek IMF support to rescue an economy crippled by the pandemic, rampant inflation, and a depreciating currency, despite analysts warning it is close to a debt crisis
• Ghana’s foreign-exchange reserves dropped to $8.3 billion at the end of April, from $9.7 billion at the end of last year.