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Cedi to depreciate slowly in 2021; to lose 3.1% value – Fitch Solutions

International research firm, Fitch Solutions, is forecasting a slower depreciation of the cedi to the dollar next year.

It expects the cedi to lose just about 3.1% of its value against the dollar in 2021, unless something untoward happens.

Its argument is that the nation’s exports are expected to recover strongly next year on the back of higher international oil prices, improve cocoa exports and continued strength in gold shipments. So far, the cedi has lost about 3.1% in value to the dollar.

“We expect the cedi to lose just 3.1% of its value against the dollar over the year on average. Ghana’s exports are expected to recover strongly in 2021 on the back of higher international oil prices, recovering cocoa exports and continued strength in gold shipments. However, imports will also rebound due to rising household consumption and business investment”, it emphasized.

Senior Research Analyst at Databank, Courage Martey also said the cedi will end the year strongly against the dollar despite the elections uncertainties.

“The cedi performance is still generally strong and I would say very impressive year-to-date. It’s done just about 3.1 percent against the US dollar; this compares favourably with last year same period when we lost over 9.0%. So, I would say that so far it’s still doing quite good within the uncertainty around, it’s still being impressive. The cedi will remain considerably stable until year-end despite the domestic and external elections uncertainty,” he said.

Reasons behind strong cedi in 2020

Many analysts have attributed the strong performance of the cedi to the Bank of Ghana’s bi-weekly Foreign Forward Auctions and Spot Market interventions, which is supported by healthy secondary reserves, equivalent to about 4.3 months of imports.

Also, the relative mild value of the dollar to some global currencies on the external front, amid rise in covid-19 pandemic has benefited the cedi.

Historical performance of the cedi to dollar

2019                 12.9% depreciation

2018                 8.4% depreciation

2017                 4.9% depreciation

2016                 9.6% depreciation

2015                 18.75% depreciation

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