The King Dollar: A cause for concern for Africa’s Emerging Markets

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U.S Dollars and Ghana Cedi
U.S Dollars and Ghana Cedi

The dollar has been steadily rising over the past year or so and has now reached a twenty year high. The dramatic implications for developing African economies, already suffering disproportionately from geo-political crises, is in danger of being ignored. 

A high interest rate environment in the US often results in damaging consequences for emerging markets within Africa. Investors tend to pour capital into the dollar with these market currencies weakening as a result. This has caused increased debt levels in developing economies such as Ghana and Uganda. 

A strengthening dollar, along with commodity prices rising due to geo-political factors, has put these African markets into a pincer. Decades of reliance on the US dollar, which is effectively a tax on emerging market currencies, has now been brought into focus through this current predicament.

In this article, Omar El-Gazzar, FX Dealer at Crown Agents Bank will set out how a strengthened dollar has hampered prosperity for developing African economies, and the dangers of ignoring this worsening situation.

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