The Ghana Cedi (GHS), Egyptian Pound (EGP), and the Ugandan Shilling (UGX) are the three Sub-Saharan Africa currencies that will “hold up” in an environment driven by “a strengthening US Dollar and possible further Fed rate hikes.”
In its latest “Sub-Saharan Africa: FX” research update report (18th June 2018), Renaissance Capital, the global financial and investment bank, cited the strengthening dollar and possible rate increases by the Federal Reserve as creating vulnerabilities for Emerging Market (EM) currencies leading to depreciation. The currencies to be the hardest hit are the Ethiopian birr (ETB) and the Angolan kwanza (AOA).
However, according to the report,  the GHS, with the other two, is likely to maintain its relatively stable value due to its ‘rating’ on three key variables: it is currently undervalued, real interest rates in Ghana is positive, and Ghana has sizable foreign exchange reserves.
“The GHS remains our cheapest currency, outside of the Mozambican metical (MZN)”, the report said, adding that most of its recent weakness came “on the back of the EM sell-off.” The report attributed Ghana’s positive real interest rates to falling inflation, and also cites Ghana’s significant FX reserves of 4.4 months of import cover, as, together, contributing to the GHS relative stability against market volatilities.
The GHS has come under pressure recently, leading to public debate over whether this is a sign of weak economic fundamentals. John Mahama, the ex-President who lost the last election in 2016 by over a million votes twitted “Today, GHC4.7 to $1. Weak fundamentals?”, landing him right in the crosshairs regarding his poor grasp of economic fundamentals.
Clearly, this latest update confirms government’s position that the GHS is stable and will weather the storm in the coming weeks.

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