The Ghanaian cedi has seen a notable appreciation against major foreign currencies, and Professor Godfred Bokpin of the University of Ghana Business School attributes this upward trajectory to firm leadership and difficult but necessary policy decisions by the government.
Speaking on a panel discussion, the Professor of Finance highlighted the critical role played by top-level collaboration between the Minister of Finance and the Governor of the Bank of Ghana. According to Prof. Bokpin, their coordinated efforts have helped anchor confidence in the local currency amidst a challenging macroeconomic landscape.
“You can see leadership here from the highest level. You can see painful choices that are manifesting in what we are seeing,” Prof. Bokpin stated.
While government officials and the New Patriotic Party (NPP) have taken credit for the cedi’s recent gains arguing these are the result of long-term policies set in motion during their administration Prof. Bokpin offered a more nuanced explanation.
He noted that the current National Democratic Congress (NDC)-led government, despite being in office for just under five months, has initiated two key policy shifts that have significantly impacted the currency’s performance.
“I want to look at it from two main policies, there is a fiscal backing. If you look at what the economy has been through in the last 3 years the excess injection of liquidity into the economy through high expenditure we have seen this government do within five months what we have been calling for since COVID-19.” he explained.
According to Prof. Bokpin, since the onset of the pandemic, economists have urged the government to cut back on wasteful spending in favor of a more gradual and sustainable fiscal consolidation strategy. These calls largely went unheeded until now.
Reflecting on Ghana’s recent economic performance under the IMF-supported program, Prof. Bokpin pointed out several missed fiscal targets in 2024. While GDP growth and international reserves performed above expectations, the government failed to meet its primary fiscal balance target. Instead of the programmed 0.5% surplus, the country posted a deficit of over 3% of GDP.
“To make matters worse, in 2022, the Bank of Ghana moved in strongly with excess liquidity that created inflationary pressures that pushed over 800,000 into poverty.” Bokpin continued.
However, he acknowledged that the 2025 budget has taken corrective action by addressing these imbalances.
“They have had to restore the IMF programme back on track by moving from a negative surplus of more than 3% of GDP to a primary balance-positive of 1.5% of GDP. What that means is that we’ve done this, but there is a trade-off growth projection was lower than the fiscal outturn in 2024.” he said.
One of the most visible effects of the new fiscal discipline is the significant reduction in government spending. Compared to 2024, nominal expenditure has been cut by GHC10 billion, a move Bokpin described as critical to stabilizing the overheated economy.
“In layman’s terms, the economy was overheating; they had to cool it down,” he explained.
While questions remain about the sustainability of the cedi’s rally, particularly with external vulnerabilities still present, analysts like Prof. Bokpin believe that recent developments are evidence of what focused leadership and painful, but strategic economic decisions can achieve.
As the government continues to navigate Ghana’s complex fiscal terrain, all eyes will remain on whether this momentum can be maintained and ultimately translated into long-term economic resilience.
