The Ghana cedi is facing renewed pressure as rising demand for foreign currency and an approaching wave of corporate profit repatriation threaten to deepen recent losses against major international currencies.
Despite significant interventions by the Bank of Ghana aimed at stabilising the foreign exchange market, the local currency weakened across both the interbank and retail markets over the past two weeks, highlighting persistent demand pressures and concerns about foreign exchange liquidity.
Latest market data show the cedi depreciated against all major trading currencies. In the interbank market, the local currency weakened from GHS 11.63 to GHS 11.85 against the US dollar. It also lost ground against the British pound and euro, with exchange rates rising to GHS 15.85 per pound and GHS 13.66 per euro.
The trend was mirrored in the retail market, where the cedi recorded further declines against the three major currencies. Analysts attribute the movement largely to increased demand for dollars by businesses seeking to finance imports, settle external obligations, and prepare for upcoming dividend and profit payments to foreign investors.
Market watchers say the pressure is likely to intensify during the second-quarter repatriation season, a period when multinational companies typically convert large amounts of local currency into foreign exchange to transfer profits and dividends to parent companies abroad.
The development comes despite an estimated US$1.1 billion in foreign exchange support provided by the Bank of Ghana in May. On a month-on-month basis, the cedi depreciated by an average of 4.18 per cent between April and May, a sharper decline than the 3.23 percent recorded in the previous month.
Analysts note that sentiment in the foreign exchange market remains cautious as demand continues to exceed available supply. Global factors are also contributing to the pressure, including stronger demand for the US dollar and elevated crude oil prices, which have increased import bills for many countries and strengthened demand for hard currencies.
To ease market pressures, authorities have announced a US$1.2 billion foreign exchange support programme for June. The intervention is expected to help moderate volatility and curb excessive speculation in the market.
However, economists warn that sustaining currency stability will require stronger foreign exchange inflows from exports, remittances and investment activity, particularly as corporate demand for dollars rises in the coming weeks.
A weaker cedi has implications beyond the foreign exchange market. It can increase the cost of imports, raise production expenses for businesses that rely on imported inputs, and potentially contribute to inflationary pressures across the economy.
Meanwhile, South Africa’s rand also experienced losses during the review period, weakening against the US dollar amid rising oil prices and renewed geopolitical uncertainties. Analysts say the challenges facing both currencies underscore the broader pressures confronting emerging and frontier markets as global economic conditions remain volatile.
By: Janice Opoku-Agyemang
