Report says 2020 election in Ghana will cause cedi depreciation against foreign currencies

The Economist Intelligent Unit (EIU) says the cedi will continue to lose value against major trading currencies, especially the US dollar, due to uncertainty over the 2020 general elections and low confidence in the financial sector.

The Ghana cedis

According to the unit, the cedi will depreciate by at least 4% (using the present interbank forex rate of GH¢5.10) in the course of the year, averaging GH¢5.31 to $1.

This was captured in the EIU’s country report on Ghana which was released in May this year.

In a briefing notes, the editor of the EIU report, Nathan Hayes, stated that the increase will be due to the increase in government spending in 202, the election year. This will push the local currency to experience close to 13% depreciation, hitting GH¢5.86 to US$1 on average in the course of the year.

“The cedi weakened sharply over the first quarter of 2019, driven predominantly by large current account and fiscal deficits, low confidence in the financial sector, and increased political uncertainty before the 2020 elections. These dynamics will maintain downward pressure on the currency, with the cedi depreciating to GH¢5.31 to $1 on average in 2019,” adding that, “These dynamics will continue in 2020, with increased spending ahead of the election; we forecast that the cedi will depreciate to GH¢5.86:$1 on average over the year.

He further noted that the domestic and global sentiment will improve in 2021 to 2023, but the cedi will depreciate further as the strong dollar and Ghana’s relatively weak domestic economic picture continue to weigh on the currency, although higher export revenue from increased oil earnings will provide some relief. We forecast that the cedi will weaken to an average of GH¢6.50 to $1 in 2023

A recent data from Bloomberg said the cedi has fallen by 7.3% as of Thursday, 16 May 2019.

The cedi hit an all-time low on 12 March 2019 ending at GH¢5.8 to US$1. This was as a result of seasonal changes and high volumes of dollar repatriation from the country.

Federal rate hikes by the US also took a toll on the country’s current due to high foreign investments.

The Bank of Ghana has introduced measures it feels will curb the depreciation and make the local currency strong against its trading partners.

Some of the measures included introducing the Ghana Interbank Forex Market Conduct, which, among other things spells out who is eligible to trade in forex in the country; how records should be kept and reported to the Bank of Ghana; and some general rules on the trading of forex.

Our newsletter gives you access to a curated selection of the most important stories daily.

Welcome to the Pulse Community! We will now be sending you a daily newsletter on news, entertainment and more. Also join us across all of our other channels - we love to be connected!

Eyewitness? Submit your stories now via social or:

Email: news@pulselive.co.ke

Recommended articles

Africa’s richest man Aliko Dangote poised to overtake another Russian billionaire Vladimir Lisin on Bloomberg billionaires list

Africa’s richest man Aliko Dangote poised to overtake another Russian billionaire Vladimir Lisin on Bloomberg billionaires list

Mzee Kibor's will made public, revealing how vast wealth and millions will be distributed

Mzee Kibor's will made public, revealing how vast wealth and millions will be distributed

Ini Edo posts new photos amid reports of welcoming a baby through surrogacy

Ini Edo posts new photos amid reports of welcoming a baby through surrogacy

Mathias Pogba brands Paul Pogba 'a so-called Muslim steeped in witchcraft' amid fetish claims about Kylian Mbappe

Mathias Pogba brands Paul Pogba 'a so-called Muslim steeped in witchcraft' amid fetish claims about Kylian Mbappe

Referee behind chaos at AFCON was rushed to hospital after match

Referee behind chaos at AFCON was rushed to hospital after match

Ne-Yo speaks out after wife Crystal announced end of their 8-year marriage

Ne-Yo speaks out after wife Crystal announced end of their 8-year marriage

Eddie Butita speaks on his fallout with Miss Mandi, offers her a job

Eddie Butita speaks on his fallout with Miss Mandi, offers her a job

Sadio Mane the odd one out as Bayern Munich stars take team photo with glasses of beer

Sadio Mane the odd one out as Bayern Munich stars take team photo with glasses of beer

Africa's richest man, Aliko Dangote, adds extra $915 million to his vast wealth in Q1 2022

Africa's richest man, Aliko Dangote, adds extra $915 million to his vast wealth in Q1 2022