Ghana’s cedi is forecast to depreciate by more than 13% by the end of the year to 12 per US dollar as gold revenues plateau, government expenditure increases, and interest rates fall, Barclays Plc has warned.

The projection suggests a significant decline from Thursday’s (July 11) closing rate of 10.4 per dollar, according to Bloomberg data. “These developments will weigh on the cedi,” Barclays economist Michael Kafe is quoted as saying in a note to clients.

Despite a strong performance earlier this year – appreciating by 41.4% in the first half and becoming the world’s second-best performing currency against the US dollar after the Russian rouble – analysts say the currency’s momentum may not be sustainable.

The initial rally was driven by decisive fiscal and monetary policy actions following President John Mahama’s election victory in December. The new administration pledged to slash the budget deficit by more than half to 3.1% of GDP in 2025, and the Bank of Ghana unexpectedly hiked its benchmark interest rate by 100 basis points to 28% in March.

Additionally, Mahama established the Ghana Gold Board (GoldBod) shortly after taking office to purchase gold directly from artisanal miners in a bid to curb smuggling and improve foreign exchange inflows.

GoldBod reportedly purchased $5bn worth of gold in the first half of the year, surpassing the $4.6bn recorded for the entire 2024. However, Barclays cautions that receipts are expected to slow in the coming months.

“Throughput at the GoldBod starts to plateau,” Kafe wrote, without providing further explanation.

At the same time, Bloomberg writes, rising domestic pressures threaten to derail fiscal targets. The government faces mounting demands to increase the remuneration of striking health workers and clear arrears inherited from the previous administration. These challenges could force Finance Minister Cassiel Ato Forson to revise the 2025 budget deficit target to 3.5% of GDP later this month, Kafe noted.

Barclays projects that the actual shortfall could widen further to 4% of GDP next year.

Falling inflation may also push the central bank to ease monetary policy. Ghana’s inflation rate dropped to 13.7% in June, the lowest in more than three years. Barclays expects the Bank of Ghana to cut its key interest rate by 350 basis points this year, making the cedi less attractive to investors seeking higher yields.

That could weaken the local currency further, as “carry positions become less attractive,” Kafe said. The bank anticipates an additional 250 basis point rate cut in 2026, with the cedi possibly depreciating to 14.5 per dollar by the end of next year.

Ghana, Africa’s top gold producer, has been relying on its mineral wealth to shore up foreign reserves and stabilise its currency following a debt default in 2022.

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