Cedi returns to ‘Africa’s worst currency’

THE Ghana cedi has returned to its position as the worst performing currency on the African continent few weeks after gaining significant value against the US Dollar.

The currency returned to GH¢4 to the dollar on the forex market two weeks ago and on the Bank of Ghana (BoG) website on Monday, August 24, 2015, the local currency was trading at GH¢4.01 to the American ‘greenback’.

Ecobank Research quoted the depreciation of the Ghana cedi at 23 per cent to the dollar as at the close of trading on Friday, August 21. It traded at GH¢4.20 to the world’s most important currency.

Uganda Shilling and Zambian Kwacha were the 2nd and 3rd worst currencies on the African continent with year-to-dates at 22.5 and 22 per cent respectively.

The recent intervention by the Bank of Ghana on July 14, 2015 which saw an injection of $20 million daily for almost a week pushed the Cedi to a low GH¢3.31 to the American ‘greenback’.

Analysts and economists are citing renewed strengthening of the US dollar and a recent negative commodity price shock as the main reasons which led many African currencies to weaken against the dollar last week.

In addition, they are expressing concerns about the fundamental weakness in the Ghanaian economy, particularly the balance of payment and fiscal situation.

In the week ahead, analysts and economists expect sustained strong dollar demand to meet import bills and US dollar debt servicing. Additionally, the experts are confident that large unsustainable fiscal and current account deficits will continue to undermine the cedi.

Outlook for local currency is also weakened by high and accelerating inflation of 17.9 percent in July and the lower than earlier expected 2015/16 cocoa crop yield.

Ecobank Research also projected an end-year cedi depreciation of GH¢4.75 to the dollar.

As at June 29, 2015, the cedi had declined in value by 26.6 percent to the US Dollar.

Meanwhile, neighboring Nigeria’s Naira has depreciated by only 7.2 % as at August 7, 2015, to the dollar.

The Ivory Coast CFA has also depreciated by 6.9 per cent to the dollar while the South African Rand lost 11 percent of its value to the American currency.

The Gambian Dalasi is however still the best currency among 26 Sub-Saharan African currencies this year. It has appreciated by 10.5 per cent as at August 21, 2015, to the dollar.