Ghana: Cedi now the world’s worst-performing currency

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Cedi

Cedi, Ghana’s national currency is now the world’s worst-performing currency as the economy continues to struggle.

The currency of the second-largest cocoa producer in the world lost as much as 3.3% of its value. Its losses for the year have already reached more than 45%, making it the highest among the 148 currencies tracked by Bloomberg.

Since the beginning of the year, the cedi’s slide has quickened. With the goal of getting $3 billion in loans over three years, Ghana has been in official talks with the International Monetary Fund for the past two months over an extended credit facility.

Since the country requires a debt sustainability plan before its requested billion in bailouts, the IMF has been sluggish to accede to Ghana’s request. “Investors were expecting to hear something in Washington last week but unfortunately nothing emerged,” Simon Quijano-Evans, a London-based economist at Gemcorp Capital, said in an emailed comment, referring to the week-long IMF annual meetings that ended on October 16. “It was radio silence.”

Ghana turned to the IMF for assistance after losing access to the Eurobond market this year and after domestic policies—including a 30% reduction in 2022 discretionary spending—failed to stop a selloff in its foreign bonds. Investor demand for holding Ghanaian debt has increased to 2,669 basis points over US Treasury bonds.

According to data from the Central Securities Depository Ghana, foreign investors’ holdings in domestically issued government and corporate bonds dropped to their lowest level ever at 12.3% at the end of August from a peak of 17.3% in April 2022.

According to indexes monitored by Bloomberg, the average yield on the country’s domestic bonds is 41.9%, the highest among developing countries.

At the end of September, Ghana’s total international reserves fell to $6.6 billion, hardly enough to pay less than three months’ worth of imports. This is less than the $10.7 billion that covered imports for nearly five months a year earlier.

The currency has outperformed the Sri Lankan rupee, which has lost about 45% of its value versus the US dollar so far this year as the nation also tries to get access to an IMF loan after a debt default.