According to data from the Bank of Ghana (BoG), the Ghanaian cedi has depreciated by 1.7% to the US Dollar in the first nine months of 2021, starting from January to September 24.

The Bank of Ghana in its release, pegged the interbank rate of the cedi to the dollar for the month of September at GH¢5.86. Though, this rate is slightly higher in the forex market, trading GHc6.04 as at Friday, 24th September, 2021.

According to the Bank of Ghana, prior to the recent pressures on the cedi, the Ghanaian local currency had shown impressive run since the beginning of the year till July, 2021. In January and June for instance, the cedi traded flat as it did not depreciate nor appreciated against the American ‘greenback’. On the average, the exchange rate of one dollar to the cedi in January was GHc5.760 and that of June was GHC5.762. On the other hand, the cedi appreciated against the dollar in the month of February to May. In February, it gained 0.4 percent against the dollar and 0.5 percent in March. Similarly, the cedi appreciated by 0.5 percent and 0.2 percent in April and May respectively.

However, the cedi lost grip of the dollar and depreciated by 0.7 percent and 1.6 percent in July and August, 2021 respectively. It then hit its highest year-to-date depreciation rate of 1.7 percent in September.

That notwithstanding, the current rate of depreciation of the cedi suggests that the local currency will stay within research institutions and analysts forecast for the year. The Bank of Ghana may even meet its depreciation target for the year, especially when the first tranche of the $1.5 billion Cocoa Syndication Loan hits the Central Bank’s account by the first week of October 2021.

This is expected to boost the supply of the American ‘greenback’ and thereby reduce the pressure on the local currency.

Some analysts blame the current depreciation of the cedi on the repatriation of dividend by some multinationals, beginning June 2021, forcing the Central Bank to regularly intervene in the market, particularly through the Forex Forward Auction.

Meanwhile, the outlook of the cedi is still positive despite the recent pressures.

According to him, there is little to worry about due to the various interventions implemented by the Bank of Ghana as well as the strong reserve position of the country. Ghana’s international reserves presently stands at $11.02 billion.

The Cedi to End the Year Within ¢6.14 and ¢6.32 to Dollar

It can be recalled that Fitch Solutions, a research arm of ratings agency, Fitch, and Databank Research early on predicted that the exchange rate will not exceed GHc6.32 by the end of the year. Fitch Solutions projected GH¢6.32 pesewas to a dollar by the end of the year, meanwhile, Databank Research also predicted GH¢6.14 pesewas.

Fitch attributed a rebound of the global economy which will stimulate economic activities, as the rationale behind its end-year cedi to dollar rate of GH¢6.32, a little above 4% depreciation.
Databank on the other hand said the recent portfolio-induced pressure tampered with its earlier optimism. However, it believes the cedi should remain supported by the gross forex reserves of about $10.99 billion.