According to Fitch Solutions November 2022 West Afri­ca Monitor Report, though it expected the cedi to remain on a depreciatory trajectory in the immediate term, the outlook depended on whether Ghana reached an agreement with the IMF for a programme.

“Although we expect that the cedi will remain on a deprecia­tory trajectory in the immediate term, the outlook depends on whether Ghana will reach an agreement with the International Monetary Fund (IMF) and obtain funding in the months ahead,” the report said.

The country announced in July 2022, it was seeking support from the IMF to address the present economic challenges.

Fitch Solutions pointed out that though it believed that the two parties would reach a deal in the first quarter of 2023, there were downside risks to this view which would have negative impli­cations for the cedi.

It stressed that the reason the Ghana cedi had suffered rapid depreciation this year was due to downgrades of its credit rating by the international rating agencies.

“This is on the back of the country’s poor fiscal economy as a result of high-interest payments, rising debt levels and large fiscal deficit, forcing foreign holders of Ghana’s bonds to sell off,” it said.

Fitch Solutions concluded that with Ghana being unable to tap international capital markets, the country’s foreign exchange reserves fell to 3.4 months of import cover in June 2022, which would continue to limit the Bank of Ghana’s ability to defend the exchange rate over the coming months.

“With Ghana being unable to tap international capital markets to finance the deficit, the coun­try’s foreign exchange reserves have fallen to $7.7 billion (3.4 months of import cover) in June 2022, from $9.8 billion in Janu­ary 2022, which will continue to limit the Bank of Ghana (BoG)’s ability to defend the exchange rate over the coming months,” it said.