Fitch Solutions, a research institute that “fuels better-informed credit risk and strategy decisions with reliable data, insightful research and powerful analytics across global markets and macroeconomic,” and Databank research, “Ghana’s premier research house,” are both forecasting the Cedi to end the year with an above GH¢6.00 rate to the dollar.
Most forex bureaux are currently selling the Ghanaian Cedi at ¢6 to a dollar.
However, while Fitch Solutions is forecasting a GH¢6.32 pesewas to a dollar by end of the year, Databank Research is predicting GH¢6.14 pesewas to a Dollar.
Fitch Solutions is attributing the rebound of the global economy which it says will stimulate economic activities, as the reason for its prediction.
Databank on the other hand said the recent portfolio-induced pressure tampered with its earlier optimism. It however believes that the Cedi should remain supported by the gross forex reserves of about $10.99 billion.
“We expect the annual international syndicated cocoa loan to provide an additional buffer in the fourth quarter of 2021 to sustain the stability of the cedi. The expected disbursement of the IMF’s Special Drawing Rights (SDR) also bodes well for the gross forex reserves and the cedi in the second half of 2021,” Databank research said.
Cedi @ GHS6 to the USD – What this means
When there’s any change in the exchange rate, prices of imported goods change in value, including domestic products that rely on imported parts and raw materials. With Ghana being heavily reliant on imported semi-finished and finished goods, this does not bode well for businesses, the consumer, and the economy.
Imported goods will become expensive as a result of the weakening Cedi. Importers and business firms that rely on imported raw materials to produce their goods may pass on the increased priced change to the final consumer leading to reduced consumer spending.
To offsets the higher costs, consumers begin to demand higher wages from their employees to pay for the goods they could once afford. If businesses are unable to bear the extra payout in wages and salaries and the Cedi continues to weaken against the Dollar, businesses may have to lay off workers causing a rise in unemployment.
Despite the negative outcome, however, a weak Cedi also has its advantages. A weak Cedi makes Ghanaian exports relatively cheaper. This drives up sales in foreign markets, causing local businesses to expand and grow, boosting the local economy.
Annual Cedi depreciation
According to the Bank of Ghana, the cedi recorded 0.5% gain in April 2021, same as March 2021, and 0.2% appreciation in May 2021.