The Bank of Ghana (BoG) has continued its aggressive intervention in the foreign exchange market, bolstering the cedi’s performance against the US dollar. On Monday, the central bank injected approximately $40 million into the interbank market, leading to a significant boost in the cedi’s value. This intervention helped push trading rates to 15.90/15.95, further stabilizing the currency amidst ongoing economic challenges.
This $40 million sale in a single day is notable, as it matches the typical amount BoG would previously sell over an entire month—$120 million for an entire quarter. The intensified intervention underscores the central bank’s commitment to stabilizing the currency and curbing inflationary pressures as the country battles economic headwinds.
Impact on Forex Bureaux
The impact of BoG’s continued intervention is beginning to show across forex bureaux. Some operators are now selling the dollar for as low as GHS 16.40, a significant drop from GHS 17.20 just a week ago. However, not all forex bureaux have adjusted their rates, with some holding onto higher prices, possibly waiting to see if the cedi’s recent appreciation will be sustained in the longer term.
The discrepancy in pricing among forex bureaux reflects the cautious optimism within the market. While many are quick to adjust rates as the cedi strengthens, others remain hesitant, unsure of how lasting these gains will be, especially given the broader uncertainties in both the domestic and global markets.
Reserves and IMF Boost Enable Intervention
The BoG’s intensified forex interventions have been made possible by its accumulated reserves, and a potential upcoming disbursement from the International Monetary Fund (IMF). The next tranche of the IMF facility is expected in less than three weeks, providing the central bank with additional liquidity to continue supporting the cedi.
The disbursement will form part of Ghana’s $3 billion bailout programme with the IMF, aimed at restoring macroeconomic stability, supporting fiscal reforms, and addressing the country’s balance of payment challenges. This anticipated injection of funds will help maintain the momentum behind the central bank’s interventions, ensuring the cedi remains resilient against future external shocks.
Impact on Prices and Inflation
The appreciation of the cedi is expected to bring some much-needed relief to consumers. A stronger currency could lead to a reduction in the prices of imported goods, particularly petroleum products, which have seen significant price increases in recent months until the latest pricing window. This could at least slow down the rate of inflation, which has been a persistent challenge for the economy.
If the cedi’s gains hold, the knock-on effect on the prices of fuel, transport, and other goods and services could provide relief for both businesses and consumers, who have been grappling with rising costs. However, analysts caution that these gains may only be short-term unless structural issues within the economy are addressed, including reducing Ghana’s reliance on imports.
Monetary Policy Committee to Meet Soon
The Bank of Ghana’s Monetary Policy Committee (MPC) is expected to meet soon for its final session of the year. During this meeting, Governor Dr. Ernest Addison will likely provide insights into the central bank’s strategy for sustaining the recent gains in the cedi. Additionally, the BoG is expected to release updated data on Ghana’s export and import values, which will offer further clarity on the sustainability of the cedi’s current trajectory.
Of particular concern will be the expected surge in corporate demand for the US dollar at the start of 2025, as businesses seek to dividend while others restock and replenish their inventories after the holiday season. The MPC will need to outline how it plans to manage this spike in demand while maintaining the currency’s strength and keeping inflation under control.
In the meantime, market watchers will be keen to see how the central bank’s continued intervention will shape the currency’s performance in the coming weeks, as well as its broader impact on the economy heading into the new year.
Outlook for 2025
With the cedi’s recent gains attributed to intensified intervention and reserve management, much of the currency’s future performance will depend on sustained market confidence and the ability to manage external shocks. The anticipated IMF tranche could provide additional breathing room, but the fundamental pressures from high corporate dollar demand and fluctuating commodity prices remain.
The next few months will be critical as the new government will look to implement policies that will maintain stability while navigating an unpredictable global economic landscape. For now, the BoG’s actions are bringing temporary relief, but long-term sustainability will require deeper reforms in fiscal management and foreign exchange policy.
