Ghana: Cedi slumps in March as coronavirus fears mount
March 23, 2020
The Ghanaian cedi lost most of its early-year gains against the U.S. dollar through end of March as the global fallout from the coronavirus pandemic intensified. On 20 March, the currency traded at 5.65 per USD, marking a 5.8% depreciation over the same day in February. Meanwhile, the currency was up1.0% year-to-date although it was down 7.2% year-on-year.
Rising fears that the Covid-19 pandemic could push the global economy towards recession set global commodity prices tumbling and saw investors fleeing emerging market assets. This dented demand for Ghanaian sovereign bonds which, coupled with Ghana’s rapidly deteriorating growth outlook owing to its dependence on commodity exports, weighed on the cedi over the past few weeks. The Central Bank’s recent emergency rate cut seemingly added further downside pressure on the cedi.
Looking ahead, the cedi is expected to weaken further before year-end, as 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 ahead of the presidential elections at the end of the year remains a notable risk to the outlook.
Author: Almanas Stanapedis, Economist