Ghana’s local currency has staged an unexpected and rapid recovery over the past month, surging 19% against the US dollar from GHS15.50 to GHS13.05 fueled by strong foreign exchange inflows and growing investor confidence. But according to a new research note from Absa Bank, the rally may have overshot fundamentals.
“Following two months of stability at 15.50/USD, the cedi has rallied by 19% over the past month to 13.05/USD currently. We believe the rally was fuelled by a combination of buoyant market confidence and increased FX support from the BoG. At these levels, we believe the cedi has rallied too aggressively.” the bank stated.
The turnaround in the cedi’s fortunes has been underpinned by surging commodity earnings, notably from gold and cocoa. These have strengthened Ghana’s balance of payments and significantly improved its gross international reserves, now standing at a multi-year high.
Per the Bank of Ghana’s latest economic data, the country’s net international reserves have jumped to 3.0 months of import cover, compared to 1.8 months a year earlier. The improvement is partly credited to the BoG’s strategic shift towards gold accumulation as a store of value, which Absa says has shielded reserves from forex volatility.
The establishment of the Ghana Gold Board (GoldBod) has further helped the government channel more gold export receipts into official reserves, increasing transparency and market control. Meanwhile, global gold prices have surged to record highs, recently hitting USD3,300 per ounce, further amplifying Ghana’s external earnings.
Looking ahead, Absa projects a continued positive trend, forecasting a current account surplus of 5.1% of GDP in 2025, up from 4.3% in 2024. The bank points to new mining operations such as Cardinal-Namdini and Newmont’s Ahafo South expansion as drivers of rising gold output.
Favourable rainfall patterns have also lifted expectations for cocoa production, especially as Ghana outperforms regional peers like Ivory Coast, where erratic weather has hampered harvests.
“Reserves should be supported by a healthy current account surplus,” Absa concluded, suggesting Ghana’s improved export performance could sustain macroeconomic gains provided the currency’s valuation remains anchored to fundamentals.
