Ghana’s Gross International Reserves (GIR), which is the country’s foreign exchange safety net, has recently reached a level the country has never seen before, creating enough room for the BoG to continue to support the strength of the cedi.
That is, the feat could fundamentally change how the BoG defends the cedi going forward.
During a courtesy call by the Asantehene, Otumfuo Osei Tutu II, at the Bank Square, Governor of the Bank of Ghana, Dr. Johnson Asiama, revealed that the country’s gross international reserves have climbed above US$13.8 billion, providing close to six months of import cover.
By his own account, this is unprecedented in the Bank’s history.
“On the external front, buffers have also been rebuilt. Our international reserves have risen above $13.8 billion. This is historic. I joined the Bank in 1995, and I have never seen such figures. In terms of import cover, we are looking at close to six months, which is unprecedented,” Dr. Asiama said.
For Ghanaians, this may sound far away or abstract, but in reality, the impact is very close. This means the central bank now has a much stronger hand in managing the foreign exchange market and shielding the cedi from sudden shocks.
Why Reserves Matter for the Cedi
Gross international reserves are essentially Ghana’s foreign currency savings. They are built from the country’s exports, loans, grants, remittances, and other inflows, and are held mainly in dollars and other major currencies.
When reserves are low, the cedi becomes vulnerable. Any surge in demand for dollars, whether from importers, fuel buyers, or investors, can quickly weaken the currency because the central bank lacks the ammunition to step in.
With reserves now covering almost six months of imports, which is a significant feat in the history of the Bank of Ghana, the situation has changed. The Bank of Ghana has enough foreign currency to meet legitimate demand without panic, reducing the sharp swings that often drive cedi depreciation.
More Room to Intervene, Less Room for Speculation
One of the biggest benefits of high reserves is credibility. With over $13 billion in reserves sitting patiently with the Bank of Ghana, traders and businesses become confident that the central bank has the muscle to deal with any speculative attacks.
With this deep foreign exchange pocket of the BoG, speculating on the cedi becomes riskier and less attractive.
If importers, banks, or forex dealers try to push the cedi down by hoarding dollars, the Bank of Ghana can step in confidently, supplying foreign exchange to calm the market. This discourages the kind of fear-driven demand that often fuels rapid depreciation.
To put it simply, the cedi is stronger not just because of the dollars in the vault, but because everyone knows those dollars are there.
Supporting Imports Without Stress
For an import-driven economy like Ghana, deep foreign exchange reserves are very critical for the sustenance of the economy.
Ghana’s import such as fuel, medicines, machinery, and “ashamedly” food imports, place constant pressure on Ghana’s foreign exchange market. In the past, limited reserves meant these demands could strain the cedi, especially during periods of high global prices.
With six months of import cover, the central bank can support critical imports more smoothly. This reduces sudden spikes in dollar demand and helps keep the exchange rate more stable, which directly affects prices at the pump, in pharmacies, and in markets.
A Buffer Against Global Shocks
Global events such as oil price spikes, tightening global interest rates, or geopolitical tensions can quickly hit emerging market currencies. These strong foreign exchange reserves act as insurance.
If external inflows slow or global markets turn volatile, the Bank of Ghana now has the buffer to absorb the shock without allowing the cedi to slide sharply. This breathing space allows policymakers to respond calmly rather than react in crisis mode.
What this Means for Everyday Life
A more stable cedi helps control inflation by reducing the cost of imported goods. It also improves business confidence, as companies can plan better without worrying about sudden exchange rate losses.
For households, this stability can mean slower increases in prices of essentials, while for government, it reduces the pressure of servicing foreign debt when the cedi is under stress.
The Bottomline
Analysts caution that strong reserves must be preserved through discipline. Reckless spending, weak export earnings, or uncontrolled imports can quickly erode even historic buffers.
The current reserve position gives the Bank of Ghana something it has long lacked, that is, the strength to support the local currency.
For now, the good news is that the cedi is backed not just by policy intent, but by deep gross international reserves, creating enough buffers for the cedi to stand. However, the structure of the economy needs to be tackled.
