By [Newstive Media]

The Ghanaian cedi, which has faced challenges in recent times, is poised for a turnaround. Fitch Solutions, a London-based firm specializing in financial analysis, predicts a positive trajectory for the cedi in the coming months. Here’s what you need to know:

Current Situation

As of now, the cedi has experienced a 19.2% depreciation against the US dollar since the beginning of the year. This decline places it among the worst-performing currencies globally. Factors contributing to this situation include subdued market sentiment during debt restructuring negotiations and limited foreign exchange intervention by the Bank of Ghana.

Reasons for Optimism

Fitch Solutions identifies several factors that will likely bolster the cedi’s performance:

1. Improved Investor Sentiment: The outlook is brightening due to enhanced investor confidence. As Ghana reaches an agreement with international bondholders to restructure $13 billion of external debt, investor sentiment is expected to improve further.

2. Economic Recovery: Ghana’s real Gross Domestic Product (GDP) growth has accelerated, rising from 3.8% in Q4 2023 to 4.7% year-on-year in Q1 2024. This economic rebound has increased demand for foreign exchange.

3. External Conditions: Fitch Solutions anticipates more favorable external conditions for Sub-Saharan African currencies in the second half of 2024. These conditions should provide additional support to the cedi.

4. Monetary Easing in the US: The start of a monetary easing cycle in the United States, expected in September, may weaken the dollar. Investors seeking higher-yielding assets could turn to emerging markets like Ghana, benefiting the cedi.

Projections

Fitch Solutions projects that the cedi will regain value by 9.0% by year-end, starting from the July 9, 2024 spot rate. The recent debt restructuring agreement and the potential easing of the dollar contribute to this positive outlook.

Conclusion

While the cedi has faced challenges, the path ahead looks promising. As Ghana continues its economic recovery and investor sentiment improves, the cedi is expected to recoup some of its losses against the dollar. Keep an eye on developments, and let’s hope for a stronger cedi in the coming months.

Note: The cedi is currently trading at GH¢15.75 at forex bureaus, having depreciated by approximately 20% against the US dollar.