Barclays Sees Ghana Cedi Weakening Further on Possible Rate Cut

Barclays analysts forecast Ghana's cedi to weaken further, potentially reaching 13.5 per dollar by the end of 2025, after already surpassing their earlier 12 per dollar estimate. This projected depreciation is attributed to the likelihood of additional central bank interest rate cuts, increased government spending, and the winding down of the International Monetary Fund program.

Analysis

Barclays Plc has issued a bearish forecast for the Ghanaian cedi (GHS), revising its year-end 2025 target to 13.5 per US dollar. This adjustment comes after the currency breached the bank's previous forecast of 12 per dollar. Analysts Michael Kafe and Andreas Kolbe attribute the expected depreciation to a confluence of factors, namely a potential further interest-rate cut by Ghana's central bank, which would diminish the currency's yield attractiveness. Additionally, an anticipated increase in government spending and the conclusion of the country's International Monetary Fund (IMF) program are cited as key drivers. The winding down of the IMF program, in particular, may signal a loosening of fiscal discipline and the removal of a critical backstop for investor confidence, exacerbating downward pressure on the currency.

Key Decisions for Investors

• Investors with unhedged exposure to the Ghanaian cedi should consider implementing currency hedges to mitigate potential losses from the forecasted depreciation to 13.5 per dollar.
• Holders of Ghana's local-currency sovereign debt must reassess risk, as significant cedi weakness will directly erode the value of coupon payments and principal when converted into hard currency.
• Monitor upcoming central bank policy meetings for indications of further rate cuts and track government fiscal announcements, as these are the primary catalysts identified by Barclays for the negative currency outlook.