London-based economic and political analysis firm, the Economist Intelligence Unit (EIU), has predicted that the Ghana cedi will hit GH¢7.87 to $1 by the end of this year.
This comes months after the cedi experienced some depreciation against the dollar in the first quarter of the year 2022.
Already, data from the Central Bank shows that the Cedi had depreciated by about 15%, in the first 3 months of this year. Also, checks at some forex bureaus show that the Cedi depreciated by as much as about 30% from the beginning of the year till March 24, 2022.
During that period the local currency went from a low of GHC 6.67 to a Dollar at the start of the year, to as high as GHC 8.50 to a Dollar within the past few days.
According to its latest assessment captured in the EIU’s five-year forecast for Ghana, published on April 13, 2022, the weakening of the cedi in the first two months of 2022, reflected increased demand for hard currency due to a strengthening in Ghana’s import-dependent economy.
However, in a bid to stabilise the cedi, the Central Bank announced foreign-exchange interventions, with US$450m to be released via foreign-exchange forward auctions in the first quarter of 2022; US$300m had been released as at early March.
With a dollar currently selling for about GH¢ 7.90 at some forex bureax, the prediction by the EIU represents a further weakening of the cedi, despite a sustained period of stability in the past few weeks.
The report however noted that, regardless, strengthening growth will continue to reinforce import dependency, causing the cedi to depreciate on average over 2022.
Pressure from the widening of sovereign bond spreads and consequently from investor sell-offs will also exert negative spillover effect on the domestic foreign-exchange market.
“As a result, the cedi is expected to depreciate sharply from GH¢6.00 to a dollar at the end of 2021 to GH¢7.87 to a dollar at the of end of 2022. We expect further gradual depreciation over the remainder of the forecast period, to GH¢10.06:US$1 at end‑2026, due to Ghana’s sustained current-account deficit,” it added.
