According to the unit, the cedi will depreciate by at least 4% (using the present interbank forex rate of GH¢5.10) in the course of the year, averaging GH¢5.31 to $1.
This was captured in the EIU’s country report on Ghana which was released in May this year.
In a briefing notes, the editor of the EIU report, Nathan Hayes, stated that the increase will be due to the increase in government spending in 202, the election year. This will push the local currency to experience close to 13% depreciation, hitting GH¢5.86 to US$1 on average in the course of the year.
“The cedi weakened sharply over the first quarter of 2019, driven predominantly by large current account and fiscal deficits, low confidence in the financial sector, and increased political uncertainty before the 2020 elections. These dynamics will maintain downward pressure on the currency, with the cedi depreciating to GH¢5.31 to $1 on average in 2019,” adding that, “These dynamics will continue in 2020, with increased spending ahead of the election; we forecast that the cedi will depreciate to GH¢5.86:$1 on average over the year.
He further noted that the domestic and global sentiment will improve in 2021 to 2023, but the cedi will depreciate further as the strong dollar and Ghana’s relatively weak domestic economic picture continue to weigh on the currency, although higher export revenue from increased oil earnings will provide some relief. We forecast that the cedi will weaken to an average of GH¢6.50 to $1 in 2023
A recent data from Bloomberg said the cedi has fallen by 7.3% as of Thursday, 16 May 2019.
The cedi hit an all-time low on 12 March 2019 ending at GH¢5.8 to US$1. This was as a result of seasonal changes and high volumes of dollar repatriation from the country.
Federal rate hikes by the US also took a toll on the country’s current due to high foreign investments.
The Bank of Ghana has introduced measures it feels will curb the depreciation and make the local currency strong against its trading partners.
Some of the measures included introducing the Ghana Interbank Forex Market Conduct, which, among other things spells out who is eligible to trade in forex in the country; how records should be kept and reported to the Bank of Ghana; and some general rules on the trading of forex.