The Bank of Ghana (BoG) will today become the second central bank in sub-Saharan Africa to hold an emergency meeting after the Bank of Uganda held one in July. The BoG, in a statement, said it would hold an emergency meeting on Wednesday, 17 August 2022, to “review recent developments in the economy.” The emergency meeting by the BoG comes against the backdrop of a persistent sell-off in the cedi and runaway inflation. The cedi recorded its biggest daily decline in more than three years on Monday and added to those losses on Tuesday to close at a fresh low north of USD/GHS9.4000. Pulling back the lens, the cedi has lost over 52 percent YTD against the USD, making it Africa’s worst performing currency among those tracked by Bloomberg. The cedi has slumped on the back of factors such as a loss of investor confidence due to a worrisome fiscal outlook further compounded by challenging external conditions, several rating downgrades, and limited dollar supply against a backdrop of increased demand.
Fitch downgraded Ghana by two notches to CCC, eight levels below investment grade. In a statement released yesterday afternoon, the agency said that the downgrade reflects the deterioration in the country’s public finances, which has contributed to a prolonged lack of access to the eurobond market, leading to a significant decline in external liquidity. Fitch noted that the government had requested support from the International Monetary Fund (IMF), which is likely to lead to additional financing from the IMF and other multilateral lenders. However, the government’s high interest costs and structurally low revenue as a percentage of GDP have increased the likelihood that IMF support would necessitate some form of debt treatment.