Ghana’s currency, the Cedi, has lost nearly half of its value from January this year to date, available figures show.
The currency traded at an exchange rate of 11.5000 for a dollar on Tuesday, October 18. This gives a depreciation rate of 48.55 percent from its rate of 5.9165 at the start of the year.
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This is a consequence of Ghana’s current fiscal challenges that have led to a massive exit of investors who are dumping the currency and bonds.
“Yes, Ghanaian Cedi is currently among the worst performing currencies in the world and this is due to their fiscal debt overburden. The government is currently in discussion with the IMF to restructure its debt and conversations of this nature typically spook the investment community,” says Dr. Emeka Ucheaga, CEO/Chief Economist at EUAIntelligence, an equity research and investment advisory company.
“Investors are all trying to exit the Ghanaian market before the debt situation further worsens and this is causing heavy selling of the currency in the market. Since the government is cash-strapped, it doesn’t have the funds to defend the Cedis by providing dollar liquidity into the market which is causing the Cedis value to collapse and investors to get desperate.
“Speculators are also actively buying dollars and selling their Cedis so that’s increasing the pressure in the market.”
Ghana faces macroeconomic instability, with an inflation rate of 37.2 percent, against a target of 8percent with a bandwidth of two percent. The country’s Monetary Policy Rate is 24.50, while the 91-day Treasury Bill Rate is 29.1096 percent, according to figures available on the website of the Bank of Ghana.