Fitch solution, a leading provider of market analysis, reports, ratings, commentary and research has indicated that the outlook of the Ghana cedi is dependent on Ghana reaching an agreement with the International Monetary Fund (IMF) to obtain funding in the months ahead.
According to Fitch Solutions November 2022 West Africa Monitor Report, regardless of the fact that the Ghana cedi is expected to remain on a depreciatory trajectory in the immediate term, its outlook depends on whether Ghana can reach an agreement with the IMF to obtain funding in boosting the economy to bring back the value of the Ghanaian currency.
“Although we expect that the cedi will remain on a depreciatory trajectory in the immediate term, the outlook depends on whether Ghana will reach an agreement with the International Monetary Fund (IMF) and obtain funding in the months ahead.”
Fitch Solutions report
The country announced in July 2022, it was seeking support from the International Monetary Fund (IMF) to address the present economic challenges. Ghana’s aim is to shore up international reserves, stabilize the cedi, continue smooth payments for imports (petroleum products, pharmaceuticals, medical equipment, among others) and restore conditions for strong economic growth (including support for government flagship programmes), while correcting underlying problems and providing catalytic effect of accessing additional financing from third parties (friendly sovereigns/commercial creditors), including resuming ICM market access sooner than later, facilitating credit rating upgrades.
According to Fitch Solutions reports, it indicated that though it believes that the two parties would reach an agreement in the first quarter of next year 2023, there are downside risks to this view which would have negative implications for the value of the cedi.
REASON FOR THE FALL IN VALUE OF THE GHANA CEDI
Fitch Solution reports stated that, the reason why the Ghana cedi has suffered rapid depreciation this year is due to downgrades of its credit rating by the international rating agencies.
“This is on the back of the country’s poor fiscal economy as a result of high-interest payments, rising debt levels and large fiscal deficit, forcing foreign holders of Ghana’s bonds to sell off.”
Fitch Solution
Fitch Solutions in its conclusion indicated that, with Ghana being unable to tap international capital markets, the country’s foreign exchange reserves fell to 3.4 months of import cover in June 2022, which would continue to limit the Bank of Ghana’s ability to defend the exchange rate over the coming months.
“With Ghana being unable to tap international capital markets to finance the deficit, the country’s foreign exchange reserves have fallen to $7.7 billion (3.4 months of import cover) in June 2022, from $9.8 billion in January 2022, which will continue to limit the Bank of Ghana (BoG’s) ability to defend the exchange rate over the coming months.”
Fitch Solutions.
READ ALSO : Israeli Experts To Support Ghanaian Entrepreneurs- Israeli Ambassador
