The Ghanaian cedi, the official currency of Ghana, has been a topic of concern and debate as its value against major international currencies has dwindled, leaving citizens and economists concerned about the downward spiral of the “₵” symbol.
The Current Scenario
Bloomberg reports analysts predict struggles for the cedi in 2024, despite the International Monetary Fund’s (IMF) support. Surprisingly, the cedi is currently the third worst-performing currency in Africa. This revelation comes after a brief period of stability amid Ghana’s economic crisis.
Factors at Play
Several factors contribute to the cedi’s precarious position:
- Weak Reserves: Courage Boti, an economist at GCB Capital Ltd, highlights that Ghana still has weak reserves, even though it reached a 10-month high of $5.9 billion. Insufficient reserves can exacerbate currency volatility.
- Election Year Pressure: Elections scheduled for December 2024 risk the cedi due to foreign exchange demand pressure. Political uncertainty often impacts currency stability.
- Post-Pandemic Recovery: Ghana faced economic challenges following the Covid-19 pandemic and Russia’s invasion of Ukraine. While the country has taken steps to address its foreign obligations, the cedi remains vulnerable.
Recent Developments
Finance Minister Dr. Mohammed Amin Adam emphasizes that the cedi has exhibited stability against major currencies since 2023. From February to December 2023, the cedi depreciated against the US Dollar by only 9.1%, a significant improvement compared to the 29.8% depreciation in the same period of 2022. As of March 20, 2024, the cumulative depreciation is 6.8%, further demonstrating stability.
The Way Forward
To sustain the Cedi’s stability, the Bank of Ghana must continue its intervention efforts. Additionally, expected disbursements from international partners, including the IMF, the World Bank, and the African Development Bank, could further stabilize the currency.
In conclusion, while the Cedi faces challenges, concerted efforts and prudent policies can help mitigate its crisis. As Ghana navigates economic waters, the fate of its currency remains a critical concern.
Disclaimer: The opinions expressed in this article are solely those of the author and do not represent financial advice or official statements.