Now that the Ghana cedi has seen a startling comeback versus the US dollar as of mid-December, rising by 63.7 percent, businesses and households can finally breathe a sigh of relief.
This is a shocking development because only a few weeks before, the Ghana cedi had been severely devalued against the US dollar on the foreign exchange market, falling as low as GH15 to the dollar at the end of November.
However, according to information from the Bank of Ghana, on December 15, 2022, the local currency defeated the US dollar and gained 63.7 percent in value (currently trading at about GH 8), bringing the year-to-date depreciation to 24.9 percent.
This has lessened the tremendous and intolerable pressure on product prices that consumers have been under for the previous two months, during which market prices have at least doubled as a result of exchange rate pressures. For instance, the price of diesel at the pump peaked at over GH23 in early November but has since dropped to about GH16.
And because of the cedi’s stability, prices have stabilised for a nation that depends significantly on imports, particularly food items, even though there haven’t been any price decreases.
What is/are accounting for the Ghana cedi’s remarkable recovery, given that it was in critical condition in the intensive care unit and had little chance of survival, is a subject that is obviously worth asking.
The Bank of Ghana claims that speculation was largely to blame for the rapid depreciation in the exchange rate, especially when it became clear that the government would begin debt restructuring. This led to a rebalancing of the portfolio in favour of foreign currency holdings as opposed to assets denominated in Ghana cedi.