Cedi rising: The currency story

 By Samuel LARTEY (Prof)

[email protected]

At the start of 2025, the outlook for Ghana’s cedi was bleak. Analysts warned of a weak currency battered by global uncertainty, fiscal hangovers from the COVID-19 era, and domestic debt challenges.

Yet by mid-year, the cedi had done the unexpected, it surged more than 40% against the US dollar, ranking among the world’s best-performing currencies. Importers welcomed relief from high costs, investors regained confidence, and ordinary Ghanaians began asking: what explains this dramatic reversal, and will it last?

The drivers of the rally

1. Trade surpluses and reserve strength

Between January and April 2025, Ghana recorded a US$3.4 billion current account surplus, the strongest in over a decade. Gold exports rose 76% year-on-year to US$5.2 billion, cushioning the economy against global shocks.

By June, gross international reserves reached US$11.1 billion, enough to cover nearly five months of imports, a level unseen since 2017. These hard flows, not speculation, anchored the currency.

2. IMF backing and debt restructuring

Ghana’s Eurobond restructuring in late 2024 and a Memorandum of Understanding with official creditors in January 2025 signaled a commitment to fiscal stability. The IMF’s fourth program review in July 2025 endorsed Ghana’s progress, giving credibility to reforms and reassuring international markets.

3. Central bank discipline

The Bank of Ghana (BoG) kept its policy rate high until inflation slowed to 13.7% in June 2025, before easing to 25% in July. Markets saw this as a confident move, not a retreat. Forward FX auctions, gold purchase programs, and tighter controls on FX transactions reduced volatility, strengthening trust in the cedi.

4. Commodities and beyond

High global gold prices and Ghana’s rising mining output created a natural cushion. Cocoa, despite disease and climate setbacks, staged a modest recovery, while remittances and non-traditional exports added stability. Together, these flows diversified Ghana’s FX sources and eased pressure on the cedi.

By the numbers (Jan–Jul 2025):

• Cedi appreciation: 40% vs. USD
• Current account surplus: US$3.4bn
• Gold export earnings: US$5.2bn ( 76% YoY)
• Reserves: US$11.1bn (4.8 months import cover)
• Inflation: 13.7% (June)

Beyond the headlines: Is it sustainable?

The rally rests on strong fundamentals, but vulnerabilities remain. A sharp fall in gold prices, fiscal slippages, or weak policy enforcement could reverse gains. Administrative measures have bought stability, but long-term resilience will depend on export diversification, productivity growth, and sustained fiscal discipline.

Lessons for households and businesses

1. Families can expect slower inflation on imported goods and should consider reducing dollar-denominated debts while the cedi is strong.
2. Businesses must move away from speculative USD hoarding, adopt risk-management tools, and channel cost savings into consumer benefits.
3. Government must sustain credibility by narrowing deficits, expanding the export base beyond gold and cocoa, and preserving robust reserves.

Conclusion

The cedi’s rise in 2025 is more than a market surprise, it reflects the payoff of discipline, reforms, and external surpluses. Yet it is also fragile, heavily tied to gold and IMF-anchored policies. To make this rally enduring, Ghana must transform short-term gains into long-term stability by diversifying exports, deepening fiscal reforms, and building public confidence. For households, businesses, and government alike, the cedi’s comeback is not just about exchange rates, it is about restoring trust in Ghana’s economy and laying a firm foundation for inclusive growth.

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