Ghana Cedi Outlook: Fitch Solutions Predicts Stronger Performance

Ghana Cedi Outlook: Fitch Solutions Predicts Stronger Performance

Fitch Solutions, a renowned financial forecasting firm based in the United Kingdom, has revised its predictions for the cedi’s performance in 2023 and beyond. Their latest projection suggests that the Ghana cedi will conclude 2023 at ¢11.40 against the US dollar, a significant improvement from their earlier estimate of ¢12.40. This positive shift comes at a time when Ghana was in negotiations with the International Monetary Fund (IMF) for a potential bailout package.

Earlier in the year, as Ghana embarked on talks with the IMF, economic forecasts were clouded by uncertainty. The prospect of securing financial aid from the IMF added an element of unpredictability to the cedi’s value. However, with the recent agreement reached between Ghana and the IMF, the financial outlook has brightened considerably.

Fitch Solutions doesn’t stop at 2023. Their projections extend into 2024, where they anticipate an even more favorable exchange rate. The firm forecasts a rate of ¢10.90 to one US dollar in 2024. This optimistic outlook is underpinned by expectations of increased inflows stemming from the IMF program, coupled with growing investor confidence in the Ghanaian economy.

The Present Cedi Valuation

As of the present moment, the Ghana cedi is trading at ¢11.53 against the US dollar in the retail market and ¢11.05 on the interbank market. This level of stability has been a welcome development since Ghana secured the IMF bailout package in May 2023. The cedi has managed to hold its ground against the dollar and other major foreign currencies.

Fitch Solutions acknowledges that short-term exchange rate volatility is likely to persist. However, they express confidence that the cedi will regain stability once a formal creditors’ committee is established and the IMF executive board approves Ghana’s program. This underscores the importance of the IMF agreement in shaping the cedi’s performance in the coming months.

Taking a closer look at the forex market’s recent activity, it becomes evident that the cedi has experienced some fluctuations, particularly against the US dollar. Despite the Bank of Ghana’s announcement of plans to auction $120 million in its FX forward auctions for the Bulk Oil Distribution Companies in the fourth quarter of 2023, the cedi saw a modest depreciation of 0.35% against the greenback. However, it exhibited strength against the pound and euro, strengthening by 1.02% and 0.20%, respectively, in the retail market.

To gain a holistic understanding of the cedi’s performance, it’s essential to consider the year-to-date figures. On the retail market, the cedi has seen a loss of 11.40% against the US dollar, while the interbank market estimates a more substantial decline of approximately 22%.

The revised forecasts from Fitch Solutions bring a ray of hope to the Ghanaian economy and its currency, the cedi. The positive outlook for 2023 and 2024 reflects growing confidence in the country’s financial stability, driven in part by the IMF program. While short-term fluctuations may continue, the prospect of a more stable cedi is on the horizon.

As Ghana navigates its economic path with renewed vigor, the cedi’s performance will remain a closely watched indicator of the nation’s financial health. The evolving landscape of currency exchange rates serves as a reminder of the intricate web of global economics and the role of international institutions like the IMF in shaping the future of nations.