After President John Mahama confirmed at his recent media encounter that the Bank of Ghana (BoG) had stopped injecting dollars into the forex market, the revelation has attracted mixed reactions, but economist Dr. Paul Appiah Konadu of Academic City University says the move is not only justified, it is necessary.
This revelation came to light after the cedi lost ground in recent weeks, depreciating by about 13%, eroding part of the gains made in the year.
Although a number of reasons have been given for the cedi’s tumble, with the chief being the high seasonal demand for dollars to import ahead of Christmas, the revelation that BoG has withdrawn its intervention came as a surprise to many.
A section cannot fathom why, despite the strong reserves position, the BoG will watch on for the cedi to fall.
Why the BoG Pulled Back
According to Dr. Konadu, Ghana’s ability to intervene in the foreign exchange market depends on a simple truth that we don’t have endless dollars to spend.
This means the Central Bank cannot pump dollars into the market all year round.
“The only source of forex for us is exports, mainly commodities, gold, and cocoa. And it just happened that in the first half of the year, gold prices rose significantly, so we had a windfall. That was the reason why the Bank of Ghana was able to supply $1.4 billion in the first quarter and an additional supply in the second quarter. But we cannot continue doing that. You will only be draining your forest reserves,” he told The High Street Journal.
He added, “I think it is something we can do in a short time when there is so much pressure on the currency, but you cannot keep doing it all year round. That is not sustainable because, one, we have limited dollar inflows.”
With Ghana no longer accessing the international capital markets, the only reliable source of forex is exports, mainly gold and cocoa. When prices surge, there’s breathing space. But in ordinary times, interventions drain reserves, leaving the country vulnerable.
The Real Problem: Imports
Dr. Konadu argues that the real driver of cedi depreciation is Ghana’s heavy import dependence. In 2024 alone, food imports hit $2 billion, much of which could have been produced locally.
He observes that every August and September, importers rush to bring in goods for December sales. That is what piles pressure on the cedi, not just speculation.
Oil imports present an even bigger challenge. Ghana spends about $400 million each month importing fuel. For Dr. Konadu, this is unsustainable when the country has the potential to refine locally.
He insists that reviving the oil refinery would cut this huge import bill and ease the burden on the cedi.
A Call for Smarter Choices
Instead of panicking about the withdrawal of BoG’s market intervention, the economist believes the focus should be on practical reforms, such as cutting food imports by boosting local production.
He adds that refining oil domestically would reduce the $400 million monthly fuel import bill, while promoting export-led growth to ensure forex inflows remain stable.
“I think responding to that caution by the IMF is in order. What we have to do is to find a way to cut imports. And I think that is one thing I have not seen much on the side of the government, strategies to cut our food imports,” he noted.
He added, “In 2024, our food imports alone were $2 billion. And a lot of the things we imported, we could have produced within Ghana. If we find a way to cut imports, we will reduce the pressure on the cedi, even without the Bank of Ghana’s intervention.”
The Bottom Line
For the economist, forex interventions are useful in emergencies, but they are no substitute for structural fixes. Ghana cannot “buy” a stable cedi with dwindling reserves.
The way forward lies in cutting unnecessary imports, reviving local industries, and channeling resources into value addition.
