Kwacha v cedi: The best and worst African currencies A combination of factors has led the world economy to decline in recent years. Starting...

Kwacha v cedi: The best and worst African currencies

A combination of factors has led the world economy to decline in recent years.

Starting with the Covid-19 crisis in 2020 which saw international trade come to a standstill, and the invasion of Ukraine and Russia in February this year.

For the African economy, problems were emerging even before these global crises.

Debts have been rising and commodity prices have fallen, thus eroding the ability to earn foreign currency in some countries.

And with that, the currency of many African currencies against the US dollar was cooked.

But lately, the story has been about the two sides of the best-performing and worst-performing currencies against the US dollar from the mainland.

Over the course of this year, the Zambian kwacha has risen to become the best performing currency in the world against the dollar.

It has gained 15% so far in 2022 and was quoted at 15.93 to the dollar in Tuesday's trading.

Experts have attributed this success to President Hakainde Hichilema's efforts to turn the economy around, particularly by restructuring its external debt to make it sustainable.

In September, the southern African country agreed a landmark deal with the International Monetary Fund for a $1.3bn (£1.15bn) guaranteed loan.

The amount will provide a way to save important social economic programs such as funding schools and hospitals as the government begins expensive debt negotiations with China and other creditors.

The move has restored the confidence of foreign investors in the copper producer.

This has also seen inflation cooling down regularly at a time when even the most developed economies in the world are struggling with rapid inflation.

Zambia's inflation has dropped from 21 percent in October last year to 9.9 percent last month.

Further west in Ghana, the cedi is the same as the kwacha in 2015.

On Monday, it was marked as the world's worst-performing currency, according to Bloomberg's currency tracker that looks at 148 currencies.

In midday trading on Tuesday, the cedi was quoted at 11.64 to the US dollar. This represents a 48% loss in value over the past 12 months.

The position of the cedi has become worse due to foreign investors losing confidence in the country and deciding to dump bonds worth the Ghanaian dollar from their portfolios.

According to the country's Central Securities Depository, the amount of domestic government and corporate bonds in the hands of foreign investors fell to 12.3% in August.

This has resulted in Ghana being unable to access cheap money from the international debt markets, and a deal like Zambia's with the IMF for $3bn in emergency financing is still ongoing.

As a result, the cost of living in Ghana has been increasing for the past 16 months with inflation reaching 37.2 percent in September.

On Monday, traders in Accra threatened to shut down for the second time in two months, denouncing the high cost of doing business.