The Ghanaian cedi has lost 72% of its value against the US dollar since the start of the year.
At the time of writing this article, the USD/GHS was trading around 1/10.45. This is indicative of a 45% decline within 6months.
Despite Ghana’s central bank raising its interest rate to a record high of 24.5% in an effort to reduce inflation and strengthen the Cedi, the currency has continued to fall.
This implies that corporate operating expenses, particularly those related to manufacturing, will grow, which will lead to increases in some market goods’ pricing and, ultimately, inflation.
Ghana is battling debt, 20-year-high inflation, a weak currency, and rising inequality. In August 2022, inflation increased to 33.9% from 9.7% the previous year. Furthermore, these vulnerabilities have been exacerbated by the current Russia-Ukraine conflict and the COVID-19 pandemic.
Hence, Ghana’s government was compelled to seek economic assistance from the International Monetary Fund (IMF). A new assessment of the country’s debt sustainability will be part of the engagement.
Ghana will need to take action to restructure its debt if the new review finds that the country’s debt levels are unsustainable in order for it to be eligible for IMF assistance.
According to the Fund, lending to nations with unsustainable debts is prohibited until those nations take action to restore their financial sustainability, which may include debt restructuring.