Ghana Cedi Moves from Worst to Best Performing Currency Against the Dollar 

Bloomberg has identified the Ghana cedi as the best-performing currency this week relative to the US dollar.

The cedi performed the best this week when compared to the dollar among around 150 different currencies from around the world.

The currency gained 10% against the dollar despite having lost more than 50% of its value over the course of the year. The cedi to dollar exchange rate is currently a little bit above GH12.50 after reaching a peak of $1 to more than GH15 this year.

About three months ago, the Sri Lanka rupee was relieved of this undesirable position when Ghana’s currency was named the worst performer against the US dollar. 

With at least seven downgrades to the country’s long-term bonds from three different international rating agencies in less than 11 months this year, the unchecked decline of the Cedi versus the USD has left Ghana’s economy in a hopeless state.

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Ghana’s public debt scaling 

In the 2023 budget announcement, Finance Minister Ken Ofori-Atta stated that the devaluation of the Ghanaian cedi in less than 11 months this year was the reason for the increase of $7.2 billion in Ghana’s public debt.

The government formally announced the “Domestic Debt Exchange” debt operation exercise on December 4, 2022, outlining the details of debt restructuring for domestic creditors. This will make it possible for the much awaited $3 billion IMF rescue tranche.

Financial Minister’s comments suggested that, “Under the programme, domestic bondholders will be asked to exchange their instruments for new ones. 

Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037. The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments will be semi-annual.”

He however, emphasised that  “the Government of Ghana has been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds, particularly small investors, individuals, and other vulnerable groups.” 

President Akufo-Addo previously stated that “there will be NO haircut” on the principal of bonds, and those individual bondholders will not be impacted. The Finance Minister reaffirmed this view.

The portfolio of government debt held by Ghana as of September 2022 totalled $48.9 billion, of which $20.5 billion was domestic and $28.4 billion was external.

The interest payment on loans for the 2023 fiscal year is projected to be GH52.6 billion, representing an increase of about 40.6% compared to the 2022 budgetary allocation and making it the largest expenditure line item the following year. Investors are awaiting the government’s decision on the nature of its external debt restructuring.

While announcing the Debt Exchange Program, Finance Minister Ken Ofori-Atta stated that “foreign debt restructuring parameters will be presented in due course.”

On November 24, 2022, his deputy, John Kumah, declared that “domestic bondholders will receive zero interest for 2023, 5% interest in 2024, and 10% interest in 2025; and also, domestic bondholders may only expect to start earning their full interest in 2026.”

According to the administration, “international bondholders, a 30% haircut on both principal and interests is proposed.” Mr. Kumah was anxious.

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