Ghana’s cedi slumped on Monday to become the world’s worst-performing currency this year as investors continued to squeeze foreign capital into the West African country.
The currency of the world’s second-biggest cocoa producer depreciated as much as 3.3%, before paring the loss to 11.2750/$ in the capital, Accra. That took its losses this year to more than 45%, the most among 148 currencies tracked by Bloomberg.
The decline of the cedi has accelerated since the beginning of the year. Ghana has for the past two months been in formal negotiations with the International Monetary Fund for an extended credit facility with the hope of receiving $3bn in loans over three years.
The IMF has been slow to yield to Ghana’s request as they require a debt sustainability plan, before lending the country its requested billion bailouts.
“Investors were expecting to hear something in Washington last week but unfortunately nothing emerged,” Simon Quijano-Evans, a London-based economist at Gemcorp Capital, said in an emailed comment, referring to the week-long IMF annual meetings that ended on October 16. “It was radio silence.”
The country sought help from the IMF after losing access to the Eurobond market this year and as homegrown policies, including cutting 2022 discretionary expenditure by up to 30%, failed to stem a selloff in its international bonds. The premium investors demand over US Treasuries to hold Ghana debt has widened to 2,669 basis points.
Holdings by foreign investors in outstanding domestic government and corporate bonds fell to 12.3% at the end of August, the lowest ever, from a 2022 peak of 17.3% in April, according to Central Securities Depository Ghana data.
The nation’s domestic bonds are trading at an average yield of 41.9%, the highest in emerging markets, according to indexes tracked by Bloomberg.
Ghana’s gross international reserves declined to $6.6bn in end-September, enough to cover only just under three months of imports. That’s down from $10.7bn a year earlier, which gave nearly five months of import cover.
The currency has overtaken the losses of the Sri Lankan rupee, which has slid nearly 45% against the greenback this year as the country also seeks to unlock an IMF loan following a debt default.
Ghana is not the only country battling with its currency. Kenya is also in the news for this reason.