Headline for .     Since the beginning of 2018, despite the Covid-19 pandemic, currencies around the world are generally down against the United States dollar.     
World Currency Observer
World Currency Observer

Exchange Rates: one year high and low

June 1, 2023. Next updates: June 14 and June 28, 2023. Visit Search to look at past issues of World Currency Observer (brochure edition).

There were more interest rate increases in May, influenced by the 0.25% increases at the beginning of May by the United States Fed and the European Central Bank (and talk that there are still more increases to come, but also that they are close to the expected peaks). With regard to exchange rates, the Mexico peso strengthened against the US$ for a 2nd month, up 1.5% in May 2023, and up by more than 6% from its value before the Covid-19 pandemic. The Haiti gourde was up by 7.5% against the US$ in May (down 30% from this time last year). The Costa Rica colón gave back its April increase in May 2023. The Euro fell by 3% in May 2023 against the US$, giving back much of its appreciation of the previous two months. Very noticeable was the sharp decline in the values of non-Euro European currencies, such as the Sweden krone - down 6.5% against the US$ in May, and down by 16.5% from its pre-pandemic level. And, after a 5% decline in May in US$ terms, the Norway krone is down by more than 25% from its pre-pandemic level. The Poland zloty fell by 1.2% against the US$ in May, and was up by 1.5% against the Euro. The Georgia lari was down by 3% against the US$ in May (up 10% from its value this time last year, and up by 10% from its pre-Covid 19 pandemic value). The Moldova leu is up by 6.5% from its value at this time last year. The Ghana cedi was up by 5% against the US$ during a month where debt restructuring agreements were announced (see below). The Burundi franc was down by 35% against the US$ in May 2023 – the sharp downward movement in the Burundi reference rate (to around 2850/1$US) reflects the beginning of operations of the Marché Iterbancaire de Devises on May 4, 2023. The Angola kwanza was down by nearly 7.5%, and the Uganda shilling was down by 9.5% against the US$ in May 2023. The China yuan was down by 3% in May against the US$, and the Japan yen was down by 2.7% (down 29% from its pre-pandemic level). The South Korea won recovered some of its April 2023 loss in May, moving up by 1% against the US$. The Sri Lana rupee was up by 8.5% against the US$ in May, and up by 18.5% since this time last year. The Malaysia ringgit was down by 3.7% in May in US$ terms, and down by 12.5% from its value before the pandemic (in December 2019). The Thailand baht was down by 2% in May against the US$. US$ prices for a broad range of commodities fell in May 2023, and are also down from their levels a year ago. Among the exceptions, gold and silver prices in U$ terms are up by 5% from their levels a year ago. Cotton prices were up by nearly 3% in May, and rice prices are up by 2.4% (and up by 9.5% from their value at this time last year.)

Ghana is a west Africa country with a strong natural resource endowment (including gold, crude petroleum and cocoa), where Covid-19 and world food inflation contributed to a situation where Ghana has had to apply to the IMF for financial assistance (for the 17th time, according to one commentator quoted below). The following are excerpts from the official transcript of a joint IMF-Ghana May 17/23 briefing, with participants which included IMF staff, the Ghana Minister of Finance and Ghana central bank governor, with questions from Ghana media and from international media organizations. The occasion was IMF approval of a US$3 billion Extended Credit Facility Arrangement for Ghana, including an immediate payment of $600 million. The Ghana experience over the last 3 ½ years is reflected in the movement of the exchange rate, the cedi (which started with a sharp depreciation as the Covid-19 pandemic took hold, and has been gaining strength over the last few months, partly on expectations of IMF and other support), and the actions taken by the government, the IMF and other creditors will likely be a benchmark for other countries (some of which are mentioned in the material below).

“Ghana has been facing a severe economic and financial crisis with a debt burden assessed as unsustainable…pre-existing vulnerability and external shocks as the COVID-19 pandemic, Russia’s war in Ukraine have resulted in acute financing pressures, depreciating cedi, declining international reserves, slowing economic activities, and high inflation. In response to these difficult circumstances…the [Ghana} Government has launched a comprehensive debt restructuring; and the Bank of Ghana has also taken decisive steps to control inflation… unlocking more funding from the rest of the international community…objectives: to restore macroeconomic stability…debt is put on a sustainable path…lay the foundations for stronger and more inclusive growth…public finances mobilizing more domestic revenue and by improving the efficiency of public spending...to, include efforts to protect the vulnerable (the Living Empowerment Against Poverty program…also the school feeding program.)…reforms to address the weaknesses in the energy and the cocoa sectors…steps are being taken to bring inflation under control; and the Bank of Ghana has been raising interest rates and has, virtually, eliminated monetary financing of the budget. A flexible exchange rate policy will also be implemented to help rebuild international reserves…the pivotal role of [Ghana] bilateral partners, especially members of the G20, [the G20] Common Framework [for debt relief], the Paris Club, the G7…support by India, Saudi [Arabia], China, and Turkey have been really tremendous in bringing us this far…a signal that a Common Framework can be made to work…a signal to our other African countries who are looking to be in this program… grateful for the forbearance of all Ghanaians in the wake of the Domestic Debt Exchange Program, which was difficult but, ultimately, a necessary exercise…the painful sacrifice of Ghanaians…such as the Domestic Debt Exchange…we have reached the point where [other] key stakeholders should come through very quickly with their support to give meaning to the catalytic role of the Fund and help build Ghana better…[Comment from journalist]: Ghana has relied on the IMF for support 17 times, and the critics say the Fund, the support from the Fund, has never been a solution to their country’s challenges…the issue of moving revenue from 13 percent of GDP to 18 percent is an important facet…Ghana actually came to the IMF largely because of the country’s debt overhang…And also it’s excessive borrowing for which reason we lost our assets to the international capital market. There’re already hints that Ghana will be returning to the capital market soon. First, I want to find out from the Finance Minister, why the rush to return today to the international capital market and, also, to the IMF…what is the official position of the Fund, and how concerning is this to, you know, their program in its entirety? On the issue of borrowing…the reason for this program is to bring us down to 55 percent debt to GDP ratio…there is no rush to go back to international capital markets, rest assured that no one is rushing to international capital markets at this juncture…the problem in Ghana started only in January 2022 and, at the end of 2021, inflation was at 12.6. And within a year, we had seen inflation rise to 54.1 percent, partly because there was a difficulty in financing the budget, the access of the capital markets was not available, which led to, you know, Central Bank accommodation of government…Already you can see that inflation has begun a downward descent. The Monetary Policy Committee has been meeting today, and I think would put out our decisions on that on Monday…there’s a $600 million [IMF] release [tomorrow]…And then we move on to there’s six months where there will be another $600 million, and then we have about 5 different tranches over 6 months in the periods moving forward to get to the 3 billion…criteria for [an upcoming] June [2023] assessment would include the zero Central Bank balancing of the budget, as well as an indicator, I believe, on the primary balance…probably will help trigger another disbursement after that assessment…an important goal to bring the revenue ratio in Ghana closer to peers in the region…a new era in regards to our own behavior, reengineering the type of imports that we have, moving towards food security, so the importation of rice, and poultry, and potatoes, et cetera, are brought down and we produce those ourselves [Comment from journalist]: The IMF has said the Central Bank has to do more in terms of increasing [interest] rates. We'd just like to know how that would be implemented considering that the rates are already high…what sort of debt relief do we expect from the bilateral creditors? Are we going to be resettling of debt, or this debt forgiveness, principal haircut of and/or interest haircut? And directly linked to that, what about the (inaudible) Project? We don't see that the banks are having any difficulty with liquidity. And in any case, the Bank of Ghana stands ready to provide liquidity for any banks that may have the future liquidity issues. And also to add that the main impact of the Debt Exchange was to reduce the capital buffers of the banks. So, what we have done is to give them some regulatory forbearance. We reduced the capital conservation buffer of 3 percent. And that reduces the capital adequacy ratio from 13 to 10 percent. And we've given them a period of three years to rebuild their capital buffers…the bold steps that have been taken by the Bank of Ghana in raising interest rates and in eliminating monetary financing of the deficit…the structure of the Ghana Financial Stability Fund, which we intend to fund with up to $1.5 billion. $250 million from the World Bank and government to contribute $500 million as we still speak to our development partners for them to participate in that…exercise was really crucial to be able to reduce the level of interest that we are paying to support our debt…the World Bank should hopefully, in the third quarter, be able to bring that initial support going forward…apprehensive about how countries such as Zambia, Chad and Ethiopia have not been able to go through, bringing much distress to the economies...[Comment from journalist]: My question has to do with the timely release of the 600 –- the first 600 million. Is it the case that there will be -- Ghana needs to meet certain criteria to –- just a second, I will get to the point–-the issue of securing timely restructuring agreements should extend our creditors. Does Ghana need to sign an MOU with its official external of creditors to secure the next 600 million payout from the program? That is, after the first review, there’s one in June and there’s one towards December -- November, December; should we have to sign the MOU before we get the 600 million? And then on the external debt restructuring, what is the estimate that net present value haircut on that component…on the first disbursement, there’s no additional conditions, the program has been approved yesterday, and the disbursement is available, the money is available to the Central Bank and to the government. On the timeline for the restructuring of the external debts, of course, on the external side, you have two components: you have the debt that is held –- that is held by official bilateral creditors. The expectation, I believe, the goal, the objective, of the Ghanian authorities is to reach an understanding with official creditors, indeed, by the time of the first review on the specifics of the terms of the restructuring. And, of course, you have the second component that has to do with the private sector external debts. And here, I believe the authorities and the advisors are engaging with these commercial creditors also with the goal of trying to advance the discussions rapidly. So, that’s for the timeline on the external debt restructuring…a very substantial and ambitious fiscal consolidation program that the Ghanian government has embarked on. Of course, this will have –- it will help reduce pressures on prices and will contribute to controlling and bringing inflation further down…many aspects will contribute to increasing [foreign exchange] reserves…policies…will help improve the external position, it will help contribute to tame the growth of imports, it will help make the economy more competitive, and bring exports higher, all of that will contribute to a more favorable external position which in itself will lead to higher reserves…Comment from journalist]: at the end of 2021, inflation was at 12.6, and within a year it rose to 54.6 because we had had a major challenge with access to financing especially…what exactly is the government going to do to ensure that banks are supported enough to provide funds to businesses? And how much has the stability fund been able to get so far? And the last will be, the Fund –- the 600 million that’s coming in tomorrow as the Bank of Ghana Governor stated. What exactly is this Fund, or this money, going to be used for? ...The government has set for itself the objective of increasing the ratio of revenues that are raised domestically substantially over the next few years…on the spending side, reduction spending is, I would say, what is the most important is for the government to be able to provide better services at a lower cost. To make government expenditure more efficient. With regards to the banks, yes, we went through the DDEP Program, and we have all seen the effect on the banking sector… concerns regarding the inflation in the U.S. and also the Federal Reserve interest rate rise…Once rates go up, the weaknesses in the banking system also affects credit to Africa, to Ghana, et cetera. So, those are all things that then becomes a responsibility of Ghana, other Africa countries to reduce imports and become more sustainable in the way in which we stop importing some 70 billion worth of food onto the continent. If we change that equation, we'll be able to shield ourselves better…On the issue of the Financial Stability Fund, yes, the World Bank has committed. We are still in negotiations of other development partners … that Ghana [ ] to get financial assurances from the Bilateral Creditors Group that's co-chaired by China and France a seminal moment for the whole Common Framework G20 expedition, we would say, because it has been really difficult for a lot of countries. … [Comment from journalist]: Considering Ghana's history of overborrowing and Government's reckless expenditure, coupled with a lot of figures that the IMF will mention that the IMF will contract these figures. How confident is the IMF in Ghana's ability to improve the necessary reforms to address the root cause of this debt crisis and to achieve a long-term economic stability with what specific conditions and measures as the IMF set forth as part of the bailout package? And how will that impact on Ghana's economy, particularly in terms of social welfare and Government spending? That is my first question. My second question has to do with what mechanisms or safeguards are in place to prevent the reoccurrence of the unsustainable debt levels in the near future, given the volatility of global market and the potential for external shocks. What contingency plans or support will the IMF provide to Ghana to help mitigate risk and ensure the sustainability of its economic recovery efforts? …the strength of the program is true on two fronts. First, on the policies that will be implemented in the program. I talked about the revenue side, the expenditure side before these policies are very sound policies. And we have mechanisms to monitor the implementation of the program going forward…. the program is very rich on the structural side. And what that means is that the Government is very committed to implement reforms that will help improve policy frameworks going forward, making sure that these improvements that we are going to see and that we are seeing already today are embedded in frameworks that are lasting. And that will continue to last well past the end of this program. So, on both counts very confident and optimistic.”

(World Currency Observer will next be updated on June 14 and June 28, 2023. Visit Search to look at past issues of World Currency Observer (brochure edition). For permission-to-quote enquiries, e-mail World Currency Observer at WCO@briargreen.com.)