Ghana's cedi appears poised for a recovery after reaching a new low against the dollar, driven by elevated interest rates, an improved government financial outlook, and increased gold revenues.

“We believe the upside to the dollar/cedi is limited now, as risks concerning Ghana’s outlook should already be in the price, while real rates are likely to remain wide and positive,” SG strategist Gergely Urmossy wrote in a note to clients.

The cedi slipped by 0.1%, hitting a new low of 15.69 per dollar at 1:27 p.m. in Accra. This brings its year-to-date decline to 24%, fueled by concerns that the government may overspend ahead of the December presidential elections, a pattern seen in the past.

However, in July, the government projected a 2024 budget deficit of 4.2% of GDP, improving from a previous forecast of 4.8%.

This aligns with the growth projections of the International Monetary Fund, which provided Ghana with a $3 billion bailout to assist during a prolonged debt restructuring after its 2022 default.

Real interest rates, adjusted for inflation, have remained strong due to easing price pressures. The central bank has maintained its benchmark rate at 29% since January, while inflation has fallen to 20.4% from 23.5%.

Additionally, the cedi is benefiting from robust gold exports, helping to counter the disappointing cocoa revenue caused by unfavorable weather conditions.

“We are seeing a growing offset from Ghana’s robust gold exports,” Nikolaus Geromont, a strategist at Absa Group Ltd., said in a note to clients. “Given that we expect the current account surplus to rise, the pace of the cedi’s weakness could ease from here.”