According to a recent report from the World Bank, it ranked the Ghana cedi as the worst-performing currency in Africa since the beginning of the year with a depreciation of 60 percent against the United States dollar.
In the report, the worst-performing currencies in the African region since the beginning of the year 2022, include Ghana with a depreciation rate of 60 percent, South Sudan with 50.8 percent, Sudan with 28.6 percent, Malawi with 25.4 percent, and CFA Franc with 13.3 percent.
The report stated that although inflation in the African region was moving on an upward trend before Russia’s invasion of Ukraine, factors including the depreciation of currencies against the dollar and an increase in commodity prices had contributed to inflationary pressures.
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The World Bank stated that it was imperative to tame inflationary pressures in the African region, otherwise, inflation could lead to social unrest, intensify conflict, and ultimately ignite political instability.
The report noted that “In addition, commodity prices, particularly food and oil prices, rose from a rebound in global demand, and oil prices rose from an OPEC+ agreement to cut production.
“These effects were amplified by the war in Ukraine. Food and fuel prices, as well as the depreciation of domestic currencies, are the dominant factors underpinning inflationary pressures in the region”.
“In addition, an increasing food and fuel pass-through made a large contribution to inflation. Food prices have increased sharply in Kenya (21 basis points), Uganda (20 basis points), and Zambia (14 basis points) since the beginning of the year (figure 1.23).
“In turn inflation erodes the purchasing power of poor people, increases poverty, amplifies food insecurity, and widens inequality”.
In 2020, the international media and research organization had rated the Ghana cedi as the best performing currency in the world against the United States Dollar.
However, with the recent world bank report, the Ghana Cedi is in a precarious situation and is not getting any better soon.
Since the beginning of the year, like the naira, the Ghana cedi has suffered persistent depreciation against major trading currencies, most especially against the US dollar.
The fall in the currency has been attributed to the demand in forex as it overtook supplies during a period when high debts and low investor confidence have made it impossible for Ghana to access the international capital market for borrowing.
In July, the government of Ghana opened discussions with the International Monetary Fund (IMF) to support its economic programmes as part of efforts to hasten the country’s recovery from challenges caused by the pandemic.
The economic downturn had forced hundreds of citizens to take to the streets to demonstrate against price hikes, a tax on electronic payments, and other levies amid an economic downturn.