IC Securities, a research firm, has adjusted its projected end-2024 exchange rate for the US dollar to Ghana cedi to GH¢15.91/US$, compared to its previous estimate of GH¢13.2/US$.
This adjustment reflects the current macroeconomic conditions.
“Following the unexpected cut in the policy rate [by the Bank of Ghana] in January 2024, we indicated our deferred inclination to raise our forecast for the US dollar Ghana cedi FX [foreign exchange] rate as we foresaw strong selling pressure on the local currency. Our decision to delay the revision to our forecast until mid-year was anchored on expected programme-related inflows and the final tranche of the cocoa syndicated loan for the 23/24 season.”
“However, these inflows did not fully materialise while GHS [Ghana cedi] supply overwhelmed the market. The subsequent adjustment to banks’ CRR [Cash Reserve Requirement] exerted a limited squeeze on local currency liquidity as banks mostly converted their maturing BoG securities into the CRR positions. Additionally, the seeming fiscal expansion via the clearance of contractor arrears continued to propagate GHS [cedi] liquidity in the forex market with a resultant pressure on the local currency”, IC Securities explained.
It also stated that the anticipated inflow of around $2.3 billion for the remainder of 2024 seems achievable, as the proposed timelines provide some credibility to its forecasts.
It further explained that the Cedi would see greater advantages from the signaling impact of the World Bank inflows and fewer gains from actual foreign exchange sales, given the Bank of Ghana’s limited interventions amid efforts to build up reserves.
“While these inflows could trigger a short-term retracement, we foresee continued hedging by domestic investors as we approach the December elections, which will potentially offset any inflows-induced appreciation. Consequently, we raise our forecast for the end-2024 US$/GHS rate to GH¢15.91/US$.
Currently, the Ghanaian currency is exchanging for around GH¢15.00 per dollar at forex bureaus.