IC Securities, a research firm, has announced a revision to their forecast for the end-of-year US dollar to Ghana cedi exchange rate, increasing it to GH¢15.91/US$, up from their initial prediction of GH¢13.2/US$. This change is attributed to the current state of the macroeconomic environment.
As explained by IC Securities, the decision to revise their forecast was influenced by the unexpected policy rate cut implemented by the Bank of Ghana in January 2024. Despite initially anticipating a strong selling pressure on the local currency, the firm chose to delay the revision until mid-year, pending the arrival of expected programme-related inflows and the final tranche of the cocoa syndicated loan for the 23/24 season.
However, the expected inflows failed to materialize fully, and the market experienced an overwhelming supply of Ghana cedis. The subsequent adjustment to banks’ Cash Reserve Requirement (CRR) had a limited impact on local currency liquidity, as banks primarily converted their maturing securities into CRR positions. Furthermore, the clearance of contractor arrears contributed to increased cedi liquidity in the forex market, exerting pressure on the local currency.
IC Securities believes that the expected $2.3 billion inflow in the latter part of 2024 is achievable, based on the provided timelines. The firm anticipates that the cedi will benefit more from the signalling effect of World Bank inflows than actual foreign exchange sales, considering the Bank of Ghana’s constrained interventions and reserve build-up.
The firm stated, “While these inflows could trigger a short-term retracement, we foresee continued hedging by domestic investors as we approach the December elections, which will potentially offset any inflows-induced appreciation. Consequently, we raise our forecast for the end-2024 US$/GHS rate to GH¢15.91/US$.” Currently, the local currency is trading at approximately GH¢15.00 to the US dollar at forex bureaus.
