The word on the streets in Ghana now is the remarkable gain in the value of the local currency against major trading currencies, especially the United States Dollar. In recent weeks and generally for most of the year, the cedi has shown resilience, departing from the known free fall that has characterised the currency. From trading at GHC 14.7 at the beginning of the year, according to the Bank of Ghana data cited by The High Street Journal, the currency slightly depreciated to about GHC 15.5 to the dollar in February before beginning the current sustained strength in the middle of April
At GHC15.5 in mid-April, the currency has consistently gained against the dollar, hitting GHC13.22 as of May 8.
The business community has acknowledged these gains on the forex market, admitting that business confidence is rebounding, offering hope for stability and predictability. For instance, GUTA says the development has made them hopeful of recouping their capital they lost during the era of excessive depreciation.
It is not debatable that exchange stability and appreciation of the cedi are imperative and non-negotiable. But beyond the benefits are underlying threats that must also be considered in order for the government to handle these gains with a balanced approach.
Why is the Cedi Bouncing Back?
The question many are asking is what is causing this renewed strength of the cedi. Can the government take the shine, or are they just exogenous factors? An analysis by The High Street Journal has revealed that the performance of the cedi is a result of both external and local factors. Let’s take a glance at some of them;
A Weakening US Currency
The US dollar, which is the most used currency in international trade, is currently facing distress. Analysts say the currency is suffering from the consequences of the US government’s sweeping tariffs. The plummeting dollar is due to the uncertainty surrounding the reciprocal tariffs and the speculations about the possibility of the US economy plunging into recession. Investors are losing confidence in the dollar, and hence the tumble it is experiencing now. With the dollar being a major currency for Ghana in international trade and even internally, a loss of the dollar is a gain for the cedi.
- Improved Gross International Reserves (GIR)
The international reserves of Ghana have significantly improved, creating a buffer for the currency. Data from the Bank of Ghana reveals that as of March 2025, the economy’s gross international reserves stood at $9.4 billion, covering 4.2 months of import cover. This is a significant improvement when compared to the same period years. GIR in March 2024 was $6.2 billion, covering 2.8 months of imports.
- Improved Bank of Ghana Gold Reserves
Within a period of just 2 years, the Bank of Ghana has been able to increase its gold reserves from 8.78 tons as of March 31st, 2023, to a whopping 31.37 tons as of April 30th, 2025. This represents an increase of 257%. The improved gold reserves are a boost in the strength of the cedi as it signifies financial strength and a currency backed by precious metal.
- Contained Government Spending
The significant impact of the fiscal operations of the government cannot be left out. The Government, at the moment, is not servicing any external debt due to the Debt Restructuring Exercise. After the last external debt servicing payment was made in January 2025, the next is scheduled for July 2025, giving respite to the cedi. This means the government at the moment is not demanding dollars to service its debt, hence easing some of the pressure.
The Upside of Cedi’s appreciation
Already, the economy has started enjoying some benefits from the renewed strength of the cedi. It is also expected that, should these gains be sustained, additional economic benefits will be recorded.
1. Inflation Control and Lower Import Cost
It is very fair to say that the cooling of inflation recorded in the last couple of months are partly due to the performance of the cedi. Critical analysis of the CPI data from the Ghana Statistical Service (GSS) reveals that the imported inflation component of the overall inflation has been reducing. This coincides with the period of the regained strength of the cedi. With the appreciation of the cedi, importers need fewer cedis to purchase goods priced in foreign currencies, reducing costs which are often passed on to consumers. The cedi’s stability is therefore playing a significant role in the country’s fight against inflation.
It is expected that imported goods such as fuel to continue to fall in price and reflect in the lives of all Ghanaians.
2. Surge in Business Confidence
Already, GUTA has confessed to the impact of this development on their trading operations. In a statement to acknowledge the cedi’s stability, the traders group admitted that the forex market has become predictable, and sentiments of hoarding dollars due to speculations are waning. With the renewed confidence, they are optimistic that their lost investment could be recouped should the development be sustained.
3. Reduced Debt Service Burden
Ghana’s external debt is largely denominated in foreign currencies, particularly the US dollar. A stronger cedi reduces the local currency cost of servicing external debt, offering temporary fiscal relief. This means the cedi’s gains can indirectly reduce the country’s debt burden. As the cedi appreciates, less or fewer local currency will be needed to be exchanged into foreign currency to service the country’s maturing debt. The opposite is also true when the currency depreciates.
4. Boost in Investor Confidence
Currency stability is a key indicator of economic health. A stronger cedi could signal to investors that Ghana is regaining macroeconomic control, potentially attracting foreign investment into bonds and equities. This helps build reserves and sustains further currency stability. In addition, Ghana’s credibility could be enhanced as a stable currency could trigger favourable ratings by the international credit rating agencies.
The Downside
Indeed, everyone is hailing the development, but it must be noted that it is also a case of “Not All That Glitters is Gold.” Currency appreciations come along with some threats or trade offs. Let’s analyse some of them.
1. Threat to the Competitiveness of Ghana’s Exports
As the cedi strengthens, Ghanaian exports, such as cocoa, gold, shea butter, and textiles, become more expensive in foreign markets, reducing their competitiveness. This could harm export revenues, especially for non-traditional exports where margins are tight. This becomes so becomes the appreciation of the cedi means the foreigner gets fewer cedis for every dollar spent previously. With exports becoming less competitive, foreigners may turn to other alternatives.
2. Threat to the Tourism Sector
As explained above, the appreciation of the cedi will cause Ghana as a tourism destination to become expensive for foreign tourists. This is because, due to the strengthened cedi, they will get less local currency if their foreign currency is converted, making the cost expensive.
3. Imports Become Cheaper, Risking Local Industries
Local manufacturers who compete with imported goods may suffer as imports become cheaper. Importers will now need fewer cedis to be converted to import the same volume of products, hence at liberty to reduce prices. This threatens local industries and makes them less competitive
4. Reduction in the value of remittances
Households that depend on remittances from relatives abroad are put at a disadvantage since the appreciation of the currency gives the less cedis for the same amount of foreign currency.
Lessons from Other Countries
Many countries across the world have experienced significant currency appreciation, which turned around to hurt their economies. Many of them deployed various stages to mitigate the impact. Let’s take a look at some of these countries;
Norway
In the 1970s, forex earnings from Norway’s oil export strengthened the krone, harming other sectors, making their exports less competitive. This situation brought about the popular term “Dutch disease”. To ease the pressure on Krone and make their exports more competitive, Norway setup a sovereign wealth fund now known as the Government Pension Fund Global to invest the oil revenues abroad.
Switzerland
In 2015, the Swiss National Bank (SNB) uncapped the Swiss franc’s exchange rate against the euro. The development led to a massive appreciation of the Swiss franc, leading to Switzerland’s exports becoming very expensive. To avert the situation, the SNB intervened in foreign exchange markets to stabilize the franc and mitigate the impact on exporters. The bank maintained negative interest rates to discourage excessive capital inflows and curb further appreciation.
Canada
Between 2002 and 2007, the Canadian Dollar appreciated by about 65% against the US Dollar, driven by high oil prices, strong domestic economic growth, and a weak US economy. While the stronger currency boosted Canadians’ global purchasing power, it hurt exporters by making Canadian goods more expensive abroad, reducing their competitiveness.
Taiwan
In early May 2025, the Taiwanese dollar experienced its largest single-day surge since 1988, driven by foreign capital inflows and speculation about easing trade tensions. This sudden appreciation posed risks to Taiwan’s export competitiveness.
Taiwan’s central bank convened an emergency meeting to address market concerns and emphasized that the currency’s rise was market-driven, not a result of manipulation.
Sustaining the Gains: What Can Ghana Do?
Despite the risk associated with the currency appreciation, the country needs to find a fine balance for the cedi’s stability, which will be advantageous to the country’s economic goals. There are a number of policies, in addition to lessons from other countries, that can be implemented to ensure that the gains made go the long haul.
First, the government must reinforce fiscal discipline by cutting down on excessive public spending and improving domestic revenue mobilization. A stronger internal revenue base will reduce the country’s reliance on borrowing, ultimately lowering debt servicing costs and easing pressure on the cedi.
Equally important is the need for sound monetary policy. The practice of excessive money printing to support government operations should be avoided, as it fuels inflation and undermines currency stability. Instead, monetary policy must be aligned with long-term macroeconomic goals that prioritize price stability and economic growth.
Another critical intervention is to revisit the long-standing import-substitution strategy, which has largely become rhetorical. Ghana must make a concerted effort to reduce its dependence on imported goods by promoting local production, particularly of high-demand items. This would help cut down the demand for foreign currency, especially the US dollar, and ease the strain on the cedi.
The government should aggressively pursue its gold purchasing program to shore up the country’s reserves. Building substantial gold reserves provides a tangible asset base to support the local currency and enhances investor confidence in the economy. In this regard, no volume of gold should be deemed excessive if it serves to strengthen the cedi’s backing.
The Bottomline
The appreciation of the cedi is a double-edged sword. Depending on how the authorities respond, the context, and duration, the appreciation can cause havoc to certain aspects of the economy. For a country like Ghana, which is striving to escape IMF cycles and industrialize its economy, currency appreciation must be managed in a way that supports macroeconomic stability without harming the growth of some critical sectors.
