The Ghana cedi could face further depreciation due to potential delays in securing the annual cocoa syndicated loan. According to Bloomberg, Ghana is experiencing setbacks in finalizing the cocoa syndicated loan agreement. The report indicates that the Ghana Cocoa Board (Cocobod) and a group of international lenders have yet to reach a consensus on terms, including the loan amount and repayment conditions. Sources close to the negotiations, who wished to remain anonymous, revealed that banks are hesitant to lend the $1.5 billion requested by Cocobod over concerns about production shortfalls.
If the delay occurs, it will mark the third consecutive year the syndicated loan has been postponed, exerting additional pressure on the cedi due to insufficient dollar inflows. Typically, the first and largest tranche of the cocoa syndicated loan is disbursed in September each year. However, since 2022, the disbursement has been delayed, sometimes arriving as late as the end of the year. Cocobod has struggled to secure the loan in recent years due to decreased production volumes and financial challenges faced by the cocoa sector regulator. This has also resulted in higher interest rates on these loans. For many years, Cocobod enjoyed favourable borrowing terms with low rates compared to other international borrowers, and the loan was often oversubscribed. However, the situation has changed, and the regulator has been unable to secure the traditional $1.5 billion loan.
Last year, after a prolonged delay, Cocobod managed to secure only $800 million, drawing down $600 million as the first tranche with an interest rate of nearly 8%. This included the one-month Secured Overnight Financing Rate (SOFR) of around 5.3% and a margin of 2.65%. In 2022, Cocobod secured $1.13 billion at SOFR plus 1.75%.
As of mid-July, the cedi had lost over 19.6% of its value, with an even higher depreciation rate on the retail market. The last tranche of $360 million from the International Monetary Fund (IMF) only temporarily stabilised the cedi before it resumed its decline. With importers beginning to place orders for Christmas, the demand for dollars has increased, and any delay in the syndicated loan, which is the next expected major inflow, could accelerate the cedi’s depreciation.
Meanwhile, the Central Bank has introduced recent administrative measures, including biometric verification for customers at forex bureaux. However, analysts suggest that unless there is a substantial dollar inflow to meet the rising demand, the cedi will continue to depreciate, potentially at an accelerated rate, despite these administrative measures.
