Projections by IC Research suggest that in 2024, the Ghanaian cedi is expected to depreciate by 8.4% against the US dollar, presenting a notable aspect of the economic outlook and setting the stage for potential impacts on international trade and financial markets.
This projection suggests a more optimistic outlook compared to the approximately 15.2% depreciation recorded in the previous year. The mid-dollar rate for the cedi is expected to hover around GH¢13.10.
IC Research’s forecast for the cedi’s depreciation is underpinned by several factors, including the anticipation of improved fundamentals in 2024. Multilateral inflows and a prudent monetary stance are expected to contribute to this positive trend, mitigating potential challenges arising from election-related uncertainties and external debt restructuring.
The stability witnessed by the cedi in December 2023 is attributed to a combination of factors. The monetary squeeze implemented by the Bank of Ghana, coupled with the weakening of the US dollar influenced by the Federal Reserve’s dovish outlook, played a crucial role. Additionally, a $600.0 million injection from the COCOBOD syndicated loan further bolstered the cedi’s stability.
Moreover, Ghana is expecting to secure a US$1.15 billion funding from the International Monetary Fund (IMF) and the World Bank by the end of February as bilateral creditors near agreement on the terms of a debt restructuring. This will further boost the strength of the local currency.
According to IC Research’s data, the mid-US dollar/Ghana cedi rate closed at GH¢12.0/US dollar on the retail market in December 2023. This represented a marginal 0.3% month-on-month appreciation, although the annual loss was still significant at 15.6%. Bloomberg, on the other hand, did not categorize the local currency in either the ‘Best Spot Returns’ or ‘Worst Spot Returns’ in 2023.
On December 29, 2023, the last trading day of the year, Bloomberg pegged the cedi at GH¢11.95 against the American greenback. However, forex bureaus sold the cedi at GH¢12.18 to one US dollar, indicating variations in the exchange rates reported by different sources.
Key Consideration for Businesses and Individuals
The anticipated depreciation in 2024 is a key consideration for businesses and individuals engaged in international transactions, as it impacts the cost of imported goods and the competitiveness of exports. Importers may face higher costs due to the weakened cedi, potentially leading to increased prices for imported goods and services. Conversely, exporters may find their products more attractive in foreign markets, potentially boosting export-related industries.
The projection of an 8.4% depreciation is notably lower than the depreciation experienced in the previous year. This suggests a degree of resilience and improvement in the economic environment, supported by anticipated multilateral inflows and a judicious monetary policy stance. These factors, according to IC Research, are expected to counterbalance uncertainties arising from elections and external debt restructuring.
It’s important to note that exchange rate dynamics are influenced by a myriad of factors, including economic policies, global economic conditions, and geopolitical events. While projections provide valuable insights, actual outcomes may vary based on the evolving economic landscape.
Despite the anticipated depreciation, the Ghanaian government’s efforts to attract multilateral inflows and maintain a prudent monetary stance signal a commitment to economic stability. The injection of $600.0 million from the COCOBOD syndicated loan in December 2023 underscores proactive measures to support the local currency.
While external uncertainties, such as election-related concerns and debt restructuring, persist, the authorities appear poised to sail through these challenges. As stakeholders adapt to the changing dynamics, policymakers will play a crucial role in shaping the trajectory of the Ghana cedi in 2024, emphasizing the importance of a holistic approach to economic management.
The forecasted 8.4% depreciation of the Ghanaian cedi against the US dollar in 2024 indicates a more favorable trajectory compared to the previous year. Businesses and individuals should closely monitor exchange rate developments and consider the potential impact on their financial activities in the course of the year.
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