According to a Bloomberg report, the Ghana cedi has emerged as the strongest performer against the US dollar in the past six months. This comes as Ghana, a significant producer of gold, cocoa, and oil, awaits board approval from the International Monetary Fund (IMF) for a $3 billion extended credit facility. The approval of this facility would enhance Ghana’s economic credibility and enable the country to regain access to international capital markets, facilitating further borrowing to stimulate economic productivity.
Foreign investors are showing a favorable outlook towards Ghana, particularly in anticipation of the IMF board’s approval following the country’s successful efforts in securing financing assurances for the restructuring of its $5.7 billion external debt. The cedi has also experienced substantial growth, appreciating by 33% since November, making it the top performer among approximately 150 currencies tracked by Bloomberg.
Ghana’s dollar bonds have demonstrated a robust performance as well, generating a return of nearly 12%, surpassing the 3.6% average for emerging and frontier markets in a Bloomberg index.
Ghana’s Minister of State for Finance, Mohammed Amin Adam, stated earlier in the week that the initial disbursement of $600 million is expected to be received immediately after the IMF board meeting on May 17, 2023. An additional $600 million will be disbursed in November, followed by equal portions of $350 million every six months, subject to IMF reviews.
As a result of positive market sentiment and the potential receipt of the first tranche of funding, the cedi is projected to continue strengthening in the coming days, potentially trading below 10 against the US dollar. Similar reactions have been observed in other markets that have received IMF programs accompanied by immediate fund disbursement, according to Daniel Kavishe, an Africa economist at Rand Merchant Bank.
While an IMF spokesperson confirmed the scheduled board meeting on Wednesday, they could not provide details regarding the specific amounts to be received until the meeting takes place. The funds allocated by the IMF will contribute to restoring Ghana’s foreign exchange reserves, further bolstering the country’s economic stability.
After reaching their highest point in August 2021, the value of the bonds has plummeted by nearly 50%. The central bank has utilized these bonds to alleviate the strain on the cedi, which faced significant selling pressure due to Ghana’s default on its debt. Kavishe stated that Ghana is employing the Group of 20’s Common Framework to restructure its debt as part of its efforts to secure the IMF program. This framework aims to enhance coordination between traditional creditors like the Paris Club and new creditors such as China, which has become the primary lender to developing nations. Zambia and Ethiopia are also utilizing this framework in their attempts to restructure their obligations
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