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CEDI DEPRECIATION

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Fitch Solutions forecasts 43% depreciation of cedi to dollar in 2022

by Radarr Africa
written by Radarr Africa

Fitch Solutions is forecasting a 43% depreciation of the cedi to the US dollar in 2022.

It is also projecting a 30.1% fall in value of the cedi to the American currency in 2023, which means the woes of the local currency will not get better anytime soon.

Disclosing this in its latest report on the country dubbed “Ghana’s Private Infrastructure Investment Set For Medium-Term Recovery”, it said, the continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi.

“We expect weakness for the Ghanaian cedi to persist throughout the near term, as we currently forecast the currency to depreciate by 43% and 30.1% against the US dollar in 2022 and 2023, respectively”. 

“We expect that Ghana’s inflation rate will remain high in the near term in the face of spiking global food and fuel prices and as continuing investor concern over the country’s large fiscal deficits puts downward pressure on the cedi”, it added.

Again, it pointed out that the currency’s weakness will keep revenue risks elevated for foreign investors dependent on revenue streams in local currency.

This is despite an expected $2 billion inflows from the Afrexim Bank and COCOBOD syndicated loan.

Cedi depreciation to add upward pressures on prices of construction materials

Furthermore, it said in the light of the reliance of Ghana’s construction industry on imports, the cedi’s weakness will add to upward pressures on prices of construction materials from existing supply chain disruptions.

This, in turn, will further contribute to increased project costs and potential investment delays in the near term.

“In 2021, Ghana’s trade deficit for iron and steel products is estimated to have exceeded $1.2 billion, up from an estimated deficit of over $780 million worth of iron and steel products in 2020. In light of the Ghanaian construction industry’s reliance on materials imports, we expect that the cedi’s weakness will add to upward pressures on construction materials prices from existing supply chain disruptions. This, in turn, will further contribute to increased project costs and potential investment delays in the near term”.

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Prices of goods and services shoot up

The cedi has since the beginning of the year lost about 36% in value to the dollar, according to Bloomberg.

It depreciated by a little over 4% last week, starting the week at ¢10.10 pesewas to the American ‘greenback’.

This has drastically shot up the prices of some goods and services, increasing both the cost of doing business and living in the country.

Source: My joy online

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GUTA threatens to close shops over Cedi depreciation

by Radarr Africa
written by Radarr Africa

Members of the Ghana Union of Traders Association (GUTA) will on Monday close all shops in the Greater Accra Region to express their displeasure about the depreciation of the Cedi against other major trading currencies.

Also, all clearing agents have been instructed, to halt clearing of goods at the ports on that day.

Announcing this at a press conference in Accra yesterday,the president of the group, Dr Joseph Obeng indicated that the rapid and continuous depreciation of the cedi, rise in interest rate and the high inflation rate, among others had caused the collapse of many businesses in the country.

He said the effect of inflation had also drastically reduced consumers’ purchasing power, adding that the inability of consumers to purchase more kept affecting business turnover, adding “we believe that with the mandate and resources given to the government to manage the affairs of the country, they can turn the economy around.”

“We as members of the business community are ever ready to avail ourselves to help government in its quest to find solutions to these myraids of problems,” he added.

Government, as a matter of urgency, he said, must inspire hope and confidence in the system, by way of appropriate policy direction that would improve productivity.

Dr Obeng further urged the government to focus on finding a means to control the excessive demand for foreign exchange in the country.

He explained that one major cause of the excessive demand for forex was the excessive importation into the country with the “overbearing” influx of foreigners in the country’s trading sector which the nation’s investment laws could be used to regulate the menace.

The GUTA president also called on the Bank of Ghana (BoG) to monitor and enforce its regulation of controlling trading with the dollar on the local market, while encouraging businesses to transact with the mainstream banks by relaxing stringent requirement on documentation.

This, he said, would control activities of the black market.

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“There should be a clear distinction between the forex bureau and what we call the black market since the forex bureaus are legitimate, we should do everything to streamline their activities to benefit the country. Our businesses are collapsing, we cannot take it any longer,” he stressed.

In furtherance, DrObeng dispelled rumours that traders were the cause of the rising cost of living in the country.

Among other things, he mentioned that the government must also ensure that the compulsory maritime insurance policy was withdrawn and also review a system targeted at increasing duties on the importation of second-hand clothing.

Source: Ghanaian Times

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Ghana domestic airlines increase ticket prices

by Radarr Africa
written by Radarr Africa

Prices of local airline tickets in Ghana have shot up by between 15 and 20 percent, prompting recession fears among local operators following “a gradual drop” in patronage.

The new prices, which took effect from July 8, 2022, was in response to a rise in operational cost occasioned by the depreciation of the cedi against the dollar, and increment in aviation fuel prices, the Ghana News Agency has gathered.

Domestic airline operators said their cost of operation had doubled since the beginning of the year and that an upward adjustment in airfares was necessary to sustain their businesses.

The cedi has depreciated by about 28 per cent since the beginning of the year whiles prices of aviation fuel have more than doubled since January this year.

In July alone, the cedi depreciated by sevenper cent to settle at GH¢ 8.50 to the dollar as of August 1, 2022.

According to industry players, Jet A-1 (one of the most commonly used fuels for commercial aviation) which was trading at an average $0.6 per litre, had shot up to an average $1.2130 (ex-refinery price) as of July 31, 2022.

The domestic airline operators claimed they initially resisted the appetite to adjust their airfares for fear that patronage would plummet.

Under the new pricing regime, passengers booking a one-way trip to Kumasi could pay as high as GH¢ 689 (depending on the airline and the time) while a round trip now costs about GH¢ 1,300.

A one-way trip from Accra to Tamale now costs an average GH¢ 642 while a round trip cost nearly GH¢1, 400.

A fuel surcharge of between GH¢ 50 to GH¢ 100, depending on the airline, is embedded in the total price build up; the fee was introduced in March this year to cushion the airlines over the rising cost of aviation fuel.

In an interview with some passengers, they expressed worry about the development, saying the increments would compel them to resort to road transport.

Some of the passengers said they would continue to travel by air to save time and for safety purposes, adding that they would travel “only when it is extremely necessary.”

“Last month, I paid GH¢ 449 from Accra to Kumasi. Barely two weeks later, I wanted to book for a return trip and the least I got was GH¢ 689.

“The increment was sudden. At least they should have advertised ahead of time, so we plan accordingly,” a regular passenger, who spoke on condition of anonymity said.

In an interview with the GNA, Mr Duncan Sambu, the Chief Operating Officer, PassionAir, said there had been a gradual drop in the patronage of its services since the introduction of the new fares weeks ago.

He said the increment was necessary as local operators were strained by the rising cost of aviation fuel and the depreciation of the cedi.

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Mr Sambu said although the cost of aviation fuel declined last month (about $0.02 per litre in the second half of July), the decrement was insignificant.

“When you compare our price increment to the depreciation of the cedi against the dollar, we are below the depreciation,” he said.

He added that: “We can see the numbers in terms of patronage have reduced because a lot of people don’t have that purchasing power.”

MrSambu said a downward adjustment of their prices “is not immediate” as projections suggest that the cedi may depreciate further in the coming weeks.

“We are still monitoring, and once things start getting better, we will look at our prices again,” he said. 

Source: Business Ghana

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