The cedi may fall to 3.50 and 4 per dollar, Benjamin Dzoboku, head of treasury at the Accra-based lender, said in an interview in the city yesterday. It dropped 0.8 percent to 3.26 per dollar by 4 p.m. in Accra. The currency of West Africa’s second-biggest economy depreciated 27 percent this year, the most among 24 African currencies tracked by Bloomberg.
Moody’s Investors Service predicts the fiscal gap will exceed 10 percent of gross domestic product for a third consecutive year. The slide in the currency is spurring the price of everything from sugar to fuel in a nation that relies on imports to feed an economy that expanded 6.7 percent in the first quarter. Inflation quickened to 14.8 percent in May and producer prices rose 33.1 percent.
“Demand for dollars for importation is still high and that is the main pressure on the cedi,” Dzoboku said.“The government’s own demand for dollars for projects and to settle debt is also high.”
The central bank will probably raise interest rates by 200 basis points at its next meeting on July 9 to contain inflation at a four-year high and make cedi assets more attractive, Dzoboku said. The Bank of Ghana left the key rate unchanged at 18 percent on April 2. The increase may not be enough to ward off more cedi weakness, he said.
The government may have to borrow from the International Monetary Fund to bolster its falling foreign-exchange reserves, an option that will be cheaper than selling Eurobonds for the third time, said Dzoboku.
Foreign-currency account holders lost confidence in the Ghanaian banking system after the central bank announced tight foreign-exchange measures on Feb. 5, Dzoboku said. The measures were eased on June 13.
“Most non-resident customers transfered their dollars abroad,” said Dzoboku of HFC, Ghana’s fifth-biggest bank by market value. “I’ve not seen any of those transfers reversed after the rules were eased.”