Market analysts at GCB Capital are expressing optimism about the cedi’s trajectory for the remainder of the year, foreseeing a stabilization by mid-2024.
The Ghanaian currency has been on a rapid depreciation trend since February 2024, mainly due to sustained corporate forex demand pressures.
Despite this, significant indicators suggest an improving macroeconomic landscape in Ghana. Projections indicate a slight uptick in GDP growth from 2.9% in 2023 to 3.3% by the end of 2024, with average inflation expected to drop from 38% in 2023 to 18% in 2024.
To bolster the local currency, the Central Bank recently intervened by selling US$13 million in the spot market and an additional $20 million to Bulk Oil Distribution Companies (BDCs) during the 51st auction.
Nonetheless, the cedi experienced depreciation against major trading currencies in the first quarter of 2024, albeit at reduced rates compared to previous years.
Courage Boti, GCB Capital’s lead researcher, sees recent developments as a reason for hope regarding the cedi’s stability in the near term.
He cites the improving macroeconomic conditions and the potential for increased absorption of forex demand through Bank of Ghana’s auctions as key factors contributing to this optimism.
“In my engagement with the traders, what they see is a pile-up of demands from the corporate sector, largely the BDCs, who are just about more or less 20% of the IFAX needs from the BDCs auction that the Bank of Ghana conducts every fortnight. So, they source the rest from the open markets and also from the other corporate sectors. You could immediately think about things like the seasonal trends that we know from before; dividends repatriation in the second quarter.”