(Bloomberg) — Ghana’s cedi weakened to a record low after companies increased demand for dollars to bring in fuel, pharmaceuticals and other fast moving consumer goods.
The currency of the world’s second-biggest cocoa producer depreciated 0.2% to 14.9335 per dollar by the close of trading in Accra, the lowest level since at least 1994 when Bloomberg began compiling the data. From the beginning of the year, the cedi is down 20% to the US currency, making it the fourth-worst performer among roughly 150 currencies tracked by Bloomberg worldwide, after the Egyptian Pound, Nigerian Naira and the Lebanese Pound.
“Dollar demand from oil importers, pharmaceuticals industry and FMCG companies are still strong,” said Samantha Singh-Jami, Africa Strategist at Rand Merchant Bank. “Authorities have propped up foreign exchange reserves quite sharply in recent months while there are still some constraints on foreign exchange liquidity in the market.”
Ghana’s gross international reserves increased to $6.6 billion in April, the highest in more than 19 months, according to data compiled by Bloomberg.
For its part, the central bank has been managing the reserves in a way that ensures the market is adequately supplied, which includes directly stepping in to absorb the foreign exchange needs of some companies to ease dollar demand from commercial banks, Bank of Ghana Governor Ernest Addison said last month.
The rise in Ghana’s reserves comes after the country stopped servicing most of its external debt since December 2022, when it embarked on a debt restructuring to qualify for an International Monetary Fund program. Disbursements under the $3 billion package and inflows it triggered from other multilateral and bilateral sources have supported reserves buildup.
A drop in cocoa export revenue by almost half in the first four months of this year due to a slump in the output of the chocolate-making ingredient has also weighed on foreign exchange supply.
“The weakening of the cedi seems to reflect foreign exchange flow mismatches,” said Samir Gadio, head of Africa Strategy at Standard Chartered Bank. “Foreign exchange demand recovered this year, though it has remained broadly constant in recent months, and continues to exceed supply.”
Revenue from cocoa shipments decreased 49% to $599 million in January through April. Ghana’s cocoa output in the 2023-24 season is seen ranging between 422,500 tons and 425,000 tons, half the country’s initial estimate.
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