More problems. As floods hit Ghana, cedi weakens to a record low against the dollar

The cedi weakened to a record on Thursday before reversing losses. The currency has dropped 22 percent this year, the most among 24 African currencies according to a report by Bloomberg.

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Seth Terkper - Finance Minister play

Seth Terkper - Finance Minister

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As floods across Ghana’s capital are rendering residents homeless and bereaved, it seems the disaster has come at a time to lay bare the government’s struggle to rein in spending and halt its currency’s slide to all-time lows.

The cedi weakened to a record on Thursday before reversing losses. The currency has dropped 22 percent this year, the most among 24 African currencies according to a report by Bloomberg.

Yields on the nation’s $1 billion of bonds due January 2026 jumped nine basis points, the most since May 26, to 8.90 percent by 11:55 a.m. in London.

“It’s unfortunate as they lack the fiscal space to deal with the situation themselves,” Yvonne Mhango, an economist at Renaissance Capital who predicts the cedi will weaken to 4.72 per dollar by the end of the year, was quoted to have said. “They’re going to have to look at what funds they can draw from the existing program to address the situation or ask their development partners to assist them. You’re probably going to see some external assistance.”

Ghana is optimistic about meeting the budget deficit target of 7.5 percent of gross domestic product this year, Finance Minister Seth Terkper said on May 12. The shortfall was 9.3 percent of GDP in 2014.

Central bank policy makers raised the benchmark interest rate 1 percentage point to 22 percent on May 13. Governor Kofi Wampah cited a weakening currency and a worsening inflation outlook as the main reasons for the action.

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