Up until the first quarter of 2023, the local currency will keep declining.
This is based on the claim made by research firm Fitch Solutions that past instances of the country’s considerable exchange rate weakening lasted for 12–14 months.
In a recent study on Ghana’s political stability, Fitch Solutions stated that the cedi will continue to suffer from large capital and financial account outflows brought on by deteriorating investor sentiment.
The research organization claims that the ongoing depreciation of the cedi will keep inflation high and lower citizens’ living conditions.
“Since currency weakening is the main cause of inflation, we anticipate that price growth will continue high in the coming months. In fact, the currency will continue to suffer from substantial capital and financial account outflows brought on by deteriorating market confidence.
The duration of prior large spells of exchange rate weakness in Ghana, which all lasted about 12 to 14 months, therefore supports our conclusion that the cedi will continue to weaken into the Q123 (the current sell-off started in January 2022). As a result, living standards would suffer and public support for the administration will decline, it said.
The continued depreciation of the cedi into Q1 2023, as predicted by Fitch Solutions, is justified given the fact that the cedi loses value against the dollar in the fourth quarter of every year due to the high demand for the US dollar by businesses and importers for repatriating profits to parent companies abroad and for imports for the Christmas and New Year celebrations, respectively.
The cedi is now depreciating against the dollar by roughly 52% year to date, trading at GHS 14.60 to the dollar and GHS 16.65 pesewas to the pound.
Source: newsthemegh.com