Gifty Annor-Sika Asantewah, a Financial Market Analyst, has predicted that the cedi will continue to depreciate this year and hit the GH¢7 mark per a dollar by the end of 2022.

Ms Annor-Sika in an exclusive interview with the Vaultz News, indicated that the local currency continues to face headwind pressures even at a time demand for the dollar is witnessing a slowdown. This, according to the analyst, is as a result of less import activities which is usually associated with post Christmas seasons.

Nonetheless, Ms Annor-Sika noted that the volatility of the currency in the first month of this year coupled with other factors, makes it difficult to predict the outlook of the local currency.

“Looking ahead, the cedi is expected to weaken further before the year ends, as the Omicron variant of the coronavirus-related downturn weighs on economic activity both at home and in the external arena. On top of that, elevated uncertainty over fiscal discipline in the face of economic downturn, especially when our credit rating is badly hit, remains a notable risk to the outlook.

“Currently the Cedi doesn’t look good in comparison to the dollar. Though it’s too early to predict as the 2022 budget is still being debated on, with the current data analysis and technical analysis, the cedi will hit the GHc7 mark by end of the year.”
Gifty Annor-Sika Asantewah

Across the streets last week, the cedi was left to find strength against the dollar as the cedi hit new historic low point of GH¢6.30 to the dollar on the last day of the week, January 29, 2022 in the retail market.

The cedi is presently selling today January 31, at GH¢6.0256 to the dollar on the interbank market, but going for GH¢6.29 on the retail market.

According to Ms Annor-Sika, this means that the cost of operating businesses, particularly manufacturing, and the price of imported goods will go up due to the fact that most of raw materials are imported. She explained that “this will consequently trigger increase in prices of some goods on the market, and for that matter, a rise in inflation.”

“Prices are surging high in all aspect of our livelihood.”
Gifty Annor-Sika Asantewah

Factors Contributing to the Depreciation of the Cedi

Gifty Annor-Sika Asantewah who is also the President of Women in Forex Ghana, highlighted a combination of factors responsible for the woes of the Ghanaian Cedi against the American greenback.

“The Cedi is not doing well due to a lot of factors including: increased corporate demand for the US dollar and the exit of the country’s bond by some foreign investors, however, it’s putting pressure on the local currency this year.

“The weak economic fundamentals… monetary policies and fiscal policies have not been fine tuned to direct the path of the economy in 2022.”
Gifty Annor-Sika Asantewah

The analyst added that excessive spending on foreign goods is also to blame.

“We spend more on such goods more than we produce locally with corresponding decline in export, hence putting pressure on the cedi, leading to high inflation.”
Gifty Annor-Sika Asantewah

Another factor Ms Annor-Sika identified was the rate at which prices are quoted in foreign currency in the country.

“Investors are not encouraged to transact business using the Cedi as mode of payment. That is, dollarization of the economy continues to increase as most prices are quoted in the dollar.”
Gifty Annor-Sika Asantewah

The Way Forward

With what the government should be doing, the analyst called on Ministry of Finance and the Ministry of Trade and Industry to show clear commitment in pursuing policies targeted at strengthening the Ghanaian Cedi.

“The Bank of Ghana should supply enough forex to meet the high demand of the dollar, as it appears the current forex auction strategy is not meeting the market demand for forex.”
Gifty Annor-Sika Asantewah

Over the medium term, the analyst emphasized on the need for the government to pursue policies that will strengthen the cedi. She called for coordinated and a balanced monetary and fiscal policy measures between the Bank of Ghana and the Ministry of Finance targeted at stabilising the local currency.

The Cedi’s Performance Last Year

The cedi endured some pressure in the second half of last year and mostly the 4th quarter of 2021.

The Ghanaian cedi placed 14th among the league of African currencies in 2021, despite an impressive run during the first half of the year.

However, the local currency was classified among the currencies with the ‘worst spot returns’ last year.

According to the report , the cedi lost 4.98% in value against the US dollar in 2021, although data from other research institutions showed a slightly lower decline in value of the local currency to the American currency.

However, in West Africa, the cedi placed 3rd in terms of performance.