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In recent weeks, the Ghanaian cedi has recorded notable gains against major international currencies particularly the US dollar offering welcome relief to import-dependent businesses and signaling renewed macroeconomic optimism.
According to a detailed report by the Centre for Policy Scrutiny, a center-right think tank focused on research and policy advocacy, the appreciation of the cedi is rooted in both domestic reforms and external dynamics.
The report unpacks six critical factors responsible for the cedi’s rally, stressing that “the cause of the appreciation is very important as it speaks to the sustainability of the trend.”
The appreciation, which began in mid-April when the exchange rate stood around GHS 15.50 to the U.S. dollar, has seen the cedi strengthen to GHS 13.30 by May 7.
This performance has sparked widespread discourse among economists, policymakers, and the public. The following are the major reasons outlined by the Centre for Policy Scrutiny:
1. Weakening of the US Dollar
Global economic uncertainties have ironically provided a boost to the cedi. The report identifies the weakening of the US dollar as a key external driver of the cedi’s recent performance. The greenback’s poor performance is “partly due to the uncertainty surrounding the recent reciprocal sweeping tariffs imposed by the President Donald Trump administration.” Fears of a looming US recession have shaken investor confidence, prompting many to pivot towards gold as a safer store of value. As Ghana trades largely in US dollars, any depreciation of the dollar “is automatically a win for the Ghana cedi.”
2. Improvement in the Bank of Ghana’s Gold Reserves
On the domestic front, one of the most striking developments has been the Bank of Ghana’s aggressive accumulation of gold reserves. From a near-static level of approximately 8.7 tonnes since independence, the country’s reserves rose marginally to 8.78 tonnes by May 2023. However, by April 30, 2025, the reserves had jumped to 31.37 tonnes—a remarkable 257% increase. The report explains, “As gold reserves are regarded as a symbol of wealth and financial strength…this significant improvement signals that the country can back up its currency with the precious metal,” thereby reinforcing investor confidence and contributing to cedi stability.
3. Strengthened Gross International Reserves (GIR)
Ghana’s gross international reserves have also seen substantial improvement, providing a buffer against external shocks and speculative pressure. As of March 2025, GIR stood at $9.4 billion—an increase from $6.2 billion in March 2024—offering 4.2 months of import cover compared to the previous 2.8 months. These bolstered reserves have “provided a substantial buffer to stabilise the currency,” the report notes, affirming the central bank’s ability to support the local currency when needed.
4. Reduced Debt Servicing and Government Demand for Forex
Ghana’s reduced need for foreign currency to meet external debt obligations is also credited for the cedi’s resilience. Thanks to the Domestic Debt Exchange Program and external debt restructuring efforts, “the government’s immediate debt servicing commitments have been considerably minimised.” This has lowered the demand for U.S. dollars, easing the pressure on the foreign exchange market and supporting a more stable exchange rate.
5. Constraint on Central Government Expenditure
Another significant domestic contributor is the government’s tightened fiscal policy. The report highlights “deliberate constraint on public spending” through expenditure capping and fiscal discipline. This has reduced liquidity in the economy, limiting inflationary pressures and curbing demand for foreign exchange. Furthermore, this restraint “sends a positive signal to markets and investors, reinforcing confidence and curbing speculative behavior that might otherwise drive the cedi’s value down.”
6. Bank of Ghana Market Intervention
A more contested factor, according to the report, is the possible intervention by the Bank of Ghana in the forex market. While some market observers suggest that the central bank injected foreign currency—especially U.S. dollars—into the market to ease short-term pressures, the Bank of Ghana has refuted such claims. The Governor insists the current exchange rate stability reflects “improved reserve levels, prudent monetary policy, and ongoing structural reforms.” He maintains that the central bank’s approach is “guided by long-term fundamentals rather than short-term currency management tactics.”
Supporting this view, the report cites Databank Research, which credits Goldbod’s agreements with nine mining companies to purchase 20% of their monthly estimated gold production before export as a contributor to cedi strength.
The Broader Economic Impact
The stabilisation of the cedi is already translating into tangible benefits for key sectors such as manufacturing, agriculture, and services—all of which rely heavily on imported inputs. “With reduced exchange rate volatility, the cost of these inputs becomes more manageable,” the report observes, paving the way for long-term investments, job creation, and increased productivity. The Ghana Union of Traders Association (GUTA) has publicly commended the Bank of Ghana and the central government, lauding the gains as vital to business stability and planning.
In conclusion, the Centre for Policy Scrutiny’s report paints a comprehensive picture of the forces behind the cedi’s recent appreciation. It combines external tailwinds, such as a weakening dollar, with disciplined domestic policies including gold reserve accumulation, fiscal tightening, and possible market intervention. While the long-term sustainability of the trend remains to be seen, the foundation appears stronger than in past episodes of short-lived currency strength.
Source: Centre for Policy Scrutiny, “Policy Discussion Paper,” May 2025.
Ruth Sekyi – ABC News GH
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