Cedi Set for Worst Weekly Drop Since 2019 as Ghana Decides Rates

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ACCRA (Capital Markets in Africa) – Ghana’s currency extended its decline Wednesday, heading for its worst weekly drop in more than three years before an emergency central bank meeting to decide on borrowing costs.

The cedi dropped 1.1% at 10:06 a.m. in Accra, extending its fall this week to 5.2%. That’s the worst decline since the seven-day period ending March 29, 2019.The cedi has plunged 35% this year making it the world’s worst-performing currency after Sri Lanka’s rupee among 150 economies tracked by Bloomberg. Ghana approached the International Monetary Fund for a loan earlier this year following the cedi’s incessant depreciation and accelerating inflation. The worsening economic situation may spur the central bank to raise its policy rate by 200 basis points on Wednesday, according to predictions by economists at Goldman Sachs Group Inc.  

There’s a “meaningful upside risk to this forecast, given the extent of FX and domestic financing pressures,” Goldman Sachs economists, Bojosi Morule and Andrew Matheny, said in a note to clients on Tuesday. “Currency pressure and the inability to finance the deficit may serve to increase the sense of urgency and ultimately prompt the authorities to accelerate IMF talks.”

The emergency meeting comes after regulators in Ghana announced Monday that water and electricity tariffs will rise 22% and 27% respectively starting next month. Those increases will add to the deteriorating inflation outlook in Ghana, said Absa Group Ltd. analyst Ridle Markus. 

The Bank of Ghana is the second in sub-Saharan Africa after the Bank of Uganda to hold an emergency meeting since Russia’s war with Ukraine erupted in February. 

Source: Bloomberg Business News

 

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