The Ghanaian Cedi is currently the world’s worst-performing currency in the financial market. The news confirms the economic struggles that the West African country has been battling since the turn of the year.
The Stock Exchange made the news public today after the Ghanaian Cedi slumped to become the world’s worst-performing currency in 2022 as investors continued to squeeze foreign capital into the West African country.
According to a report by Bloomberg, out of all the 148 currencies tracked, the Ghanaian Cedi – which is the currency of the world’s second-biggest cocoa producer depreciated as much as 3.3% before paring the loss to 11.2750/$ in the capital, Accra. That took its losses this year to more than 45%, the most among all the 148 currencies tracked.
The news and current economic challenges in the country have shocked many social and economic analysts who followed the progress in Ghana’s fortunes within the last few years. Also, it appeared that President Nana Addo Dankwa Akufo-Addo was finally getting it right as regards governance in Africa. Very few predicted the failing economy and crash of the currency in Ghana.
The decline of the cedi has accelerated since the beginning of the year. For the past two months, Ghana has been in formal negotiations with the International Monetary Fund for an extended credit facility with the hope of receiving $3bn in loans over three years.
The IMF has been slow to yield to Ghana’s request as they require a debt sustainability plan before lending the country its requested billions in bailouts.
“Investors were expecting to hear something in Washington last week but unfortunately nothing emerged,” Simon Quijano-Evans, a London-based economist at Gemcorp Capital, said in an emailed comment, referring to the week-long IMF annual meetings that ended on October 16. “It was radio silence.”
You will recall that President Nana Akufo-Addo of Ghana took a U-turn a few months ago and approached the International Monetary Fund (IMF) for aid. The president had earlier canceled all IMF support in Ghana and called on African leaders to discontinue their dependence on the IMF and World Bank.
President Akufo-Addo sought help from the IMF after his country lost access to the Eurobond market earlier this year. Also, homegrown policies, including cutting 2022 discretionary expenditure by up to 30%, failed to stem a selloff in its international bonds. As a result, the premium investors demand over US Treasuries to hold Ghana debt has widened to 2,669 basis points.
According to Central Securities Depository Ghana data, foreign investors in outstanding domestic government and corporate bonds fell to 12.3% at the end of August, the lowest ever, from a 2022 peak of 17.3% in April.
The nation’s domestic bonds are trading at an average yield of 41.9%, the highest in emerging markets, according to indexes tracked by Bloomberg.
Ghana’s gross international reserves declined to $6.6bn in end-September, enough to cover only under three months of imports. That’s down from $10.7bn a year earlier, which gave nearly five months of import cover.
The currency has overtaken the losses of the Sri Lankan rupee, which has slid nearly 45% against the greenback this year as the country also seeks to unlock an IMF loan following a debt default.
However, Ghana is not the only country that is currently battling the failed currency problem. The Kenyan Shilling was also announced to be a struggling currency in need of immediate bailout.
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Credit: African News, Bloomberg