Ghana Cedi Falls to Record on Concern Floods to Swell Deficit

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Ghana’s cedi weakened to a record to extend its fifth week of losses on speculation that flooding across the capital will further strain the government’s fiscal deficit.

The currency of the world’s second-biggest cocoa producer dropped as much as 2.8 percent before paring the decline to 0.8 percent to trade at 4.125 per dollar at 12:36 p.m. in Accra. That took the cedi’s loss to 2.1 percent this week, according to data compiled by Bloomberg. A close at this level would be the worst since May 1994 when Bloomberg began compiling the data.

President John Dramani Mahama said his government will spend 50 million cedis ($12 million), including building emergency housing, to help victims and will do whatever is necessary to prevent these floods from happening again. At least 180 people have died from the heaviest rains in six years.

“Ghana needs these floods like it needs a hole in the head,” Nicholas Spiro, managing director at London-based Spiro Sovereign Strategy, said by phone on Friday. “It comes at the worst time from a financial markets point of view.”

The cedi has slumped 22.8 percent this year, the worst among 24 African currencies tracked by Bloomberg.

The biggest economy in West Africa after Nigeria began implementing a program with the International Monetary Fund in April, that gives it almost $1 billion over three years to narrow its budget deficit. The government is seeking to cut the budget gap to 7.5 percent of gross domestic product this year from 9.3 percent in 2014.

“Some people in the currency market may be thinking the government will have to spend additional funds to get help to victims of the flood,” Angus Downie, head of economic research at Ecobank Transnational Inc., said by phone from London on Friday. “Anything that demands additional spending will add pressure on the government’s already fragile financial situation.”