Ghana’s currency hit a new all-time low against the dollar this week, a sign of structural imbalances in an economy considered one of Africa’s best growth prospects, according to a Reuters report.
The Bank of Ghana cited seasonal increase in dollar demand and higher volumes of dividend repatriation as reasons for the currency’s slide. Growing demand from local firms and traders for dollars to pay for imports outstripped supply.
Ghana’s economy is expected to grow by 8 percent in 2013 largely due to exports of gold, cocoa and oil. However, the economy’s dependence on commodity exports has left its currency vulnerable to dips in gold and cocoa prices this year, traders said in the report.
Ghana’s $4 billion account deficit could grow to $5 billion given current commodity prices, said Sampson Akligoh, head of research at Ghana’s Databank.
Ghana plans to issue a Eurobond worth up to $1 billion to refinance existing debt and fund infrastructure projects, its vice president announced in May, according to another Reuters report. The Eurobond sale has increased the currency’s sensitivity to investor sentiment, Akligoh told Reuters.
The cedi lost almost 20 percent in 2012 on rising import demand. In response, the central bank introduced measures including medium term bond sales to mop up liquidity and tightened interbank foreign exchange restrictions. The decline slowed this year and is at 7.7 percent.