Accra, Ghana – In a concerning development for the Ghanaian economy, the country’s currency, the cedi, has depreciated significantly against the US dollar, earning the unwanted distinction of being the world’s worst-performing currency, according to a recent Bloomberg report.
As of late 2022 and continuing into 2025, the cedi has lost substantial value, with some reports indicating a depreciation of up to 45% against the US dollar this year alone. This drastic decline surpasses the performance of other struggling currencies, including the Sri Lankan rupee.
Factors Contributing to the Cedi’s Decline
Several factors have contributed to the cedi’s poor performance, including:
– High Debt Levels: Ghana’s high debt levels and low investor confidence have limited its access to the international capital market for borrowing.
– Inflationary Pressures: Rising inflation rates, with producer prices jumping 41.2% in July, the fastest pace in eight years, have further eroded the cedi’s value.
– Demand and Supply Imbalance: A demand and supply imbalance in the foreign exchange market, with demand far outstripping supplies, has put additional pressure on the cedi.
– Delayed IMF Disbursement: The country’s negotiations with the International Monetary Fund (IMF) for a $3 billion loan have been slow to yield results, contributing to the cedi’s volatility.
Government Response
In response to the cedi’s decline, the Bank of Ghana has taken steps to stabilize the currency, including increasing its lending rate to 22% to curb inflationary pressures and halt the depreciation of the cedi against the US dollar. The government has also opened discussions with the IMF to support its economic programs and hasten the country’s recovery from the challenges caused by the pandemic.
Economic Implications
The cedi’s poor performance has significant implications for Ghana’s economy, including:
– Increased Import Costs: A weaker cedi makes imports more expensive, which can lead to higher prices for goods and services.
– Inflationary Pressures: The cedi’s decline can fuel inflation, reducing the purchasing power of Ghanaians.
– Economic Instability: The currency’s volatility can deter investors, undermining economic stability and growth.
As the situation continues to unfold, it remains to be seen how the government and the Bank of Ghana will address these challenges and stabilize the cedi.