In the last month of 2022, Ghana’s cedi was reported as the best-performing currency in the world, signalling a significant recovery for the West African country that suffered severe economic downturns throughout 2022.
According to a report by Bloomberg, the Cedi rose by 10% in December, the biggest advance among about 150 currencies tracked by Bloomberg, a significant turnaround for a currency that had “lost half of its value and had occupied the bottom slot in the charts.”
But how bad was Ghana’s currency and economic outlook at the beginning of 2022? According to an early report by Bloomberg, shared bondholders were cutting Ghana off due to federal reserve hikes rates and the elusiveness of the country’s budgets.
Ghana’s $750 million bonds said to be due in March 2027 fell to 79.4 cents on the dollar in January 2022, sending the yield to nearly 14%. Of 14 Ghanaian dollar bonds, 13 were trading with an extra premium of at least 1,000 basis points, a level considered distressed, according to the Bloomberg index tracking sovereign debt.
Investors also expressed concern about the rising debt and if more borrowing costs would not shut the country out of global markets. At the time, the Ministry of Finance said the government’s debt had increased from 39.7% of GDP at the end of November 2021 to 78.4%.
In the first quarter of 2022, Ghana was also hit by the slumping of its currency by up to 45%, the worst among over 140 currencies tracked by Bloomberg. Inflation also hit the country, rising as high as 34% according to the Bank of Ghana, eating away at people’s incomes with millions of Ghanaians struggling to make ends meet. The situation led to an eruption of protests on the streets of Accra, with people calling for the President and the Finance Minister to step down.
However, the president at the time asked for patience and labelled a few steps he hoped could better the living conditions while hoping for positive outcomes from negotiations with the IMF to seek financial support.
Meanwhile, in March 2022, President Nana Akufo-Addo announced a 30% cut in discretionary expenditure and a 30% cut in the salaries of the President, Vice President, Ministers, Deputy Ministers and political officeholders, in hopes that the move would quell the rising unrest from the people.
Thankfully, help came in the final quarter of the year in the form of a positive response from the IMF. The IMF and Ghana reached a staff-level agreement to support economic policies and reforms with a new three-year arrangement under the Extended Credit Facility (ECF) of about US$3 billion. The agreement aimed at restoring macroeconomic stability and debt sustainability while protecting the vulnerable, preserving financial stability, and laying the foundation for strong and inclusive recovery for the country.
Now with the recent news of the current recovery of the Cedi and how well the government has handled the crisis, there is no doubt that the country would recover from the worst economic crisis it has recorded in nearly 40 years, according to President Akufo-Addo.