Current account stability to mitigate pressure on cedi; currency to end year at GH¢11.40 to a dollar
Fitch Solutions says the current account stability will mitigate any downside pressure on the Ghana cedi. According to Fitch Solutions, strong export receipts will continue to bolster Ghana's already robust forex reserves, which have risen to US$14.4 billion, the equivalent of roughly six months of imports.
Fitch Solutions said that in the event that investor sentiment toward Ghana weakens, the central bank would retain sufficient reserves to intervene in the interbank market and contain excessive market volatility. Policymakers are likely to tolerate a modest depreciation bias to support export competitiveness, particularly as the cedi appears overvalued on a real effective exchange rate basis. Fitch Solutions expects broad currency stability with a slight depreciation bias, with the cedi ending the year at GH¢11.40 to one US dollar.
Fitch Solutions said there is a possibility that its current projections for the Middle East conflict prove overly optimistic and that the war persists longer than anticipated. In such a scenario, global energy prices would rise further and remain elevated for longer, increasing the likelihood of global supply‑chain disruptions. In Ghana, this would translate into stronger inflationary pressures and a weaker outlook for household consumption. Nevertheless, Fitch Solutions expects the transmission channels identified above to remain unchanged. Fitch Solutions concluded that Ghana's external position would remain resilient to the shock, while pressures on the fiscal account would likely remain limited, even as the growth outlook deteriorated.
Quick Summary
Fitch Solutions anticipates that the stability of Ghana's current account will play a key role in the face of shifting investor attitudes. The expectation is that strong exports will continue to support the country's forex reserves - but what could this mean?
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