Following the impressive run of the Ghana Cedi against major trading currencies, the Center for Economic Research and Policy Analysis (CERPA) is urging the government to be concerned about the long-term sustainability of the development, not the short-term gains.
The cedi has seen a notable appreciation in recent weeks, rekindling hopes of quickened economic recovery and easing pressure on households and businesses impacted by years of exchange rate volatility.
Businesses are already confirming the breath of fresh air as they admit the turnaround following the local currency’s renewed strength.
But the question CERPA is asking is: Will this last?
In a recent policy brief titled “The Cedi’s Appreciation: A Turning Point or Temporary Relief?”, the economic policy think tank argues that the answer hinges on some key policy reforms.
CERPA also argues that unless this appreciation is backed by a firm and credible commitment to fiscal discipline, the gains will disappear in no time, bringing back the days of excessive volatility and its accompanying impact.
CERPA is proposing some key measures for the consideration of the government, if indeed it wants the development to be a turning point for the economy, or it becomes a temporary relief. Below are the recommendations of CERPA for the consideration of the government;
Strengthen Macroeconomic Stability
The think tank is calling on the government to treat this moment not as a fleeting reprieve, but as a strategic opportunity to reset the fundamentals of the economy.
CERPA says fiscal discipline and prudent management should be prioritized. Per CERPA’s observation, the economic management of the government thus far played a pivotal role in the cedi’s current impressive performance, and hence there is a need for it to be improved to enable the development to stick and stay.
“The government should maintain prudent fiscal management and reduce the fiscal deficit through disciplined spending and enhanced domestic revenue mobilisation. A credible commitment to macroeconomic stability builds investor confidence and supports a stronger currencу,” parts of the policy brief copied to The High Street Journal read.
Encourage Retention and Reinvestment of Foreign Profits
To consistently ensure adequate inflow of forex, CERPA is convinced that a policy that will motivate multinational companies to retain a portion of their profits to plough back is very essential. This will reduce the amount of forex repatriated from the country and hence minimize the pressure on the local currency.
CERPA says, “The government should consider strategies to incentivise foreign investors to reinvest a portion of their earnings locally rather than fully repatriating profits. This would reduce excessive demand for foreign currency and support cedi stability.”
Promote Import Substitution and Domestic Production
One structural change recommendation from CERPA is the deliberate effort the government must deliberately push to reduce the over-reliance on imports. For the policy think tank, the state must rise to change the “import-driven economy” narrative.
Although the gains, the think tank says, will amount to nothing if the economy still demands huge sums of forex to import goods which can be produced locally.
CERPA proposes that, “Reducing reliance on imports through policies that support local industries, particularly in agriculture and manufacturing, can ease pressure on the cedi. Providing incentives for local production will help correct trade imbalances and strengthen the domestic economy.”
Strengthen the Gold Purchase Programme
The state, CERPA says, must bolster its gold reserves. The government and the Bank of Ghana should reinforce the gold purchasing programme as a strategic tool to increase the country’s gold reserves. A stronger reserve position provides intrinsic backing to the cedi and enhances the central bank’s capacity to respond to exchange rate pressures, and serves as a long-term buffer against external shocks, thereby supporting sustained currency stability.
Adopt Targeted Monetary Policies
CERPA believes the input of the Bank of Ghana to the course is also critical. The Central Bank should implement interest rate and liquidity management policies aimed at maintaining low and stable inflation. By keeping inflation under control, real returns on investments are preserved, thereby attracting both domestic and foreign investors.
Boost Foreign Exchange Reserves Through FDI and Export Diversification
The state, CERPA recommends, must prioritise attracting long-term foreign direct investment (FDI) by ensuring political and economic stability, improving the business environment, and offering competitive investment incentives. Simultaneously, increasing the volume and value of exports, particularly through value addition and product diversification can enhance foreign exchange earnings.
Why This Matters Now
The cedi’s recent rise has been attributed to improved forex liquidity, seasonal inflows, and some policy interventions. However, these drivers are often short-lived. CERPA warns that without structural reforms the country risks sliding back into the cycle of depreciation and inflation that has eroded public trust and economic resilience.
