Ahead of Ghana’s December 7 general election, some analysts criticised the appreciation of the Ghana cedi against the US dollar. One of such critics was Dr. John Kwakye, Director of Research at the Institute of Economic Affairs (IEA).
Dr. Kwakye accused the Bank of Ghana (BoG) of orchestrating the currency’s gain to create a favourable economic impression during the election period saying that the currency’s improvement was not rooted in strengthened economic fundamentals, as claimed by the BoG. The central bank had earlier credited the cedi’s performance to improved external sector conditions.
Fast forward to January 2025, Dr. Kwakye’s concern appears to align with market data, which shows that the cedi recently suffered a sharp 2.94% depreciation against the US dollar, pushing its year-to-date loss to 3.87% as of January 13th, 2025.
The depreciation followed the Bank of Ghana’s auction of $20 million to Bulk Oil Distribution Companies (BDCs), aimed at stabilizing the market. The cedi ended last week trading at GH¢16.15 to the dollar, its steepest loss since January 1, 2025. The local unit also weakened against other major currencies, recording a 0.52% decline against the pound and 1.52% against the euro on a week-on-week basis.
Despite last week’s setback, the cedi began trading this week relatively stable, holding at a mid-rate of GH¢16.40 to the dollar. Analysts are cautiously optimistic about the currency maintaining stability in the short term, as global markets react to the beginning of a new administration in the US. His policy announcements are expected to influence currency dynamics worldwide.
Meanwhile, the Bank of Ghana continues to attribute the currency’s earlier gains to favourable trade balances and foreign inflows. However, critics like Dr. Kwakye argue that the true state of the cedi has become evident after the elections when external factors and market forces are less likely to be influenced by political considerations.
