According to projections by the Center for Economic Finance and Inequality Studies [CEFIS] at the University of Ghana, the cedi is expected to end the year a little above GHS 7 to the dollar.
This means that the local currency will lose about 60 pesewas in value this year to the American dollar.
This therefore implies that the cost of operation of businesses particularly those in the manufacturing sector will go up, leading to the increases in prices of goods on the market.
Defending its projection, the Center of Economic Finance and Inequality Studies asserted it’s forecast for the end of year depreciation of the cedi to the dollar is 99 percent accurate.
The Center therefore wants the Bank of Ghana to supply enough forex to meet the high demand for the dollar, as it appears that the current forex auction strategy is not meeting with the market demand for the dollar.
The Center believes that the view of inadequate supply of forex is gathered from the wide disparity that exists between the Bank of Ghana’s currency pair quote and the interbank market’s currency pair quote.
Over the medium term, the Center urges the state through the Finance Ministry and the Ministry of Trade and Industry, to show clear commitment in pursuing policies aimed at strengthening the local currency.
In conclusion, the Center called for a coordinated and balanced monetary and fiscal policy measures between the Bank of Ghana and the Finance Ministry targeted at stabilizing the Ghana cedi.
Cedi ends 2021 with 3.93% depreciation to dollar
The Ghana cedi ended last year with a depreciation of a little above 9% on the retail market and 3.93% to the dollar on the interbank forex market.
This performance has been described as mixed by analysts and currency traders because of the spread between the retail and interbank market.
Secondly, the local currency until the second half of this year, had been appreciating against the American ‘greenback’.
In 2020, the local currency registered about 3.9% decline in value to the American dollar on the retail market.
Senior Currency Analyst at Databank Research, Courage Martey, says there is uncertainty of the outlook of the cedi, and that requires a further action from the Bank of Ghana to help stabilize the local currency.
As we head into the year 2022 when our economy rebounds and imports also drives further demand for foreign currency, we might also experience further shocks. So in the end to mitigate these shocks, we must start to see increasing interest rates, particularly from the policy side to curb some of these pressures in addition to the Central Bank interventions”.
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So the outlook of the cedi on the back of the recent developments heading into 2022 is quiet uncertain. So really the Bank of Ghana will have to stand firm with its interest rate decisions and strategic interventions”, he explained.
According to Bloomberg, the Ghana cedi was ranked 14th among the league of African currencies last year despite an impressive run during the first half of 2021.
Notwithstanding the cedi’s performance for last year, the local currency was classified among currencies with the worst quote and spot returns.
The cedi, according to Bloomberg, lost 4.98% in value against the dollar in 2021 although data from other research institutions show a slightly lower decline in value of the local currency to the dollar.
However, in West Africa, the cedi placed third in terms of performance due an amalgamation of factors which include increasing cooperate demand for the dollar and the exit of some foreign investors from the country’s bond market putting pressure on the local currency in the last two months of the year.
Again importation of goods during the final part of the year by traders to sell during the Christmas period increased the demand for the dollar.
Despite a rebound in oil prices among others, the dollar inflows were not enough to stabilize the local currency.
CURRENCIES WITH ‘WORST SPOT RETURNS’
| CURRENCY | YEAR-TO-DATE | RANKINGS |
| Djibuotian Franc | -0.11% | 8th |
| Congolese Franc | -1.25% | 9th |
| Gambian Dalasi | -1.92% | 10th |
| Kenyan Shilling | -3.51% | 11th |
| Mauritian Rupee | -4.03% | 12th |
| Rwandan Franc | -4.52% | 13th |
| Ghana Cedi | -4.98% | 14th |
| Nigerian Naira | -5.02% | 15th |
| Malawian Kwacha | -5.34% | 16th |
| Botswana Pula | -7.68% | 17th |
| South African Rand | -7.72% | 18th |
| Sierra Leone Leone | -9.98% | 19th |
| Ethiopian Birr | -22.20% | 20th |
Africa’s top currencies: cedi places 9th
In September 2021, the Ghana cedi slipped one place to the 9th position out of 15th top African currencies.
In August, the cedi was ranked 8th among Africa’s top currencies with a depreciation of 1.30% to the US dollar. This was after it had appreciated against the American ‘greenback’ in the first six months of this year.
The Namibian dollar however dislodged the local currency from the 8th position after an improved performance against the American currency in September 2021.
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