The Ghanaian currency, the Cedi, has been facing a significant decline in value in the early days of 2023.
A local analysis indicates that the Cedi has depreciated by 12.7% within the first 17 days of 2023, making it the second worst-performing currency among Sub-Saharan Africa’s top 15 currencies. Only the Egyptian Pound has depreciated faster having dropped by 16.5% in the same period.
This decline in the Cedi’s value comes after a difficult year for the currency in 2022, when it became one of the worst-performing currencies in the world in October 2022. Despite the year-to-date 12.7% drop being lower than the 38.86% decline seen throughout the whole of 2022, it suggests that the resurgence in the Cedi’s value seen towards the end of 2022 has dissipated.
In efforts to stabilize the economy and boost the Cedi, the Ghanaian government secured a $3 billion loan from the International Monetary Fund (IMF) while also launching a gold-for-oil scheme.
The new year slump in the Cedi’s value is therefore concerning especially for an economy which heavily relies on exports, particularly in the mining and agricultural sectors. A weaker currency makes Ghanaian exports less competitive on the global market, which could negatively impact economic growth.
Furthermore, the depreciation of the Cedi could lead to higher inflation as the cost of imports becomes more expensive. This could put pressure on the country’s already-strained budget and may cause difficulties for businesses and households.
The government is expected to take further steps to resuscitate the economy and improve the Cedi’s value. Proposed responses include implementing measures to increase foreign exchange reserves, such as increasing exports and attracting foreign investment.
Additionally, steps to improve the country’s overall economic performance, such as implementing structural reforms and reducing government debt, could also help to boost the Cedi’s value in the long-term.
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