Press Release

Ghana Cedi’s Recent Appreciation

In assessing the cedi’s notable turnaround, it is important to situate the appreciation within a broader policy and global context. Africa Policy Lens (APL) acknowledges that the new government’s fiscal consolidation measures have played a pivotal role in stabilizing the macroeconomic environment. The decisive steps taken—expenditure freezes, arrears audits, and strategic forex interventions—have contributed significantly to restoring market confidence.

However, APL also recognizes the residual impact of earlier policy actions, particularly the painful but ultimately successful debt restructuring initiated in 2023–2024. That restructuring reduced near-term debt service obligations and created fiscal space to support stabilization efforts in 2025. Moreover, Ghana’s gold reserve accumulation strategy, launched by the previous administration, laid the groundwork for the central bank’s recent gold-backed forex liquidity operations. In addition to domestic reforms, global macroeconomic shifts—especially the weakening of the US dollar due to trade tensions and the emerging global tariff war—have also contributed to the cedi’s strength, as other currencies gain ground against the dollar. These combined domestic and global forces have converged to support the cedi’s rise, though their sustainability remains a pressing question.

Ghana’s currency, the cedi, has surged to become one of the world’s best-performing currencies in 2025, appreciating by over 20% against the US dollar year-to-date. This remarkable turnaround follows a turbulent 2024 when the cedi lost nearly a quarter of its value, contributing to high inflation and economic instability. As of mid-May 2025, the cedi trades at the retail around GH¢13.5 to the US dollar – a 17% gain since January 1. Inflation has also eased (down to about 21% in April 2025 from much higher levels), reflecting reduced import costs as the currency strengthens. The Africa Policy Lens (APL) commends this progress in macroeconomic stability. However, we note that the foundations of this appreciation and the sustainability of these gains merit close scrutiny and prudent policy action.

Role of Gold Reserves and Forex Interventions

A key factor in the cedi’s stabilization has been Ghana’s strategic use of gold reserves and direct market interventions. The Bank of Ghana (BoG) aggressively accumulated gold through its Domestic Gold Purchase Programme (DGPP) (popularly “Gold-for-reserve” and now the Gold Board initiative) during 2023-2024. Official data show gold reserves climbed from 8.78 tonnes in May 2023 to 30.53 tonnes by December 2024 – an increase of ~21.8 tonnes in 20 months, averaging about 1.1 tonnes added per month (see Figure 1). This bolstered Ghana’s foreign exchange buffer significantly. By contrast, from January to April 2025, gold reserves edged up only from 30.53 to 31.37 tonnes – a rise of just 0.84 tonnes in four months (about 0.21 tonnes per month). The sharp slowdown in gold accumulation suggests that authorities may have tapped into these gold reserves or at least paused new purchases, possibly to inject U.S. dollars into the market and meet forex demand. In effect, Ghana appears to be leveraging its gold stockpile to support the cedi, a tactic that boosts dollar liquidity and calms depreciation pressure in the short term.

Indeed, the central bank’s direct forex market interventions have been massive: in April 2025 alone, BoG injected $490 million into the foreign exchange market to ease dollar shortages and strengthen the cedi. Reports further indicate sizable interventions in other months – for example, about $264 million was injected in March 2025 as part of the stabilization strategy. Cumulatively, nearly $1 billion is estimated to have been supplied to the forex market by the government and central bank between January and May 2025, a clear sign of determination to shore up the currency. These combined measures – gold-backed FX swaps and direct dollar sales – have undeniably helped the cedi rally in recent months, quelling speculation and improving market confidence. APL acknowledges the positive impact of these tactical moves, while urging transparency about their scale and finite nature.

Figure 1: Domestic Gold Purchase Programme (DGPP) May 2023 – April 2025
Source: Data from Bank of Ghana (2025)

Fiscal Restraint and Economic Adjustments Supporting Stability

Beyond the central bank’s actions, fiscal policy choices have played a critical role in the cedi’s rebound. The government has pursued austerity and consolidation measures that, while painful, have reduced excess demand for foreign currency. Public expenditure has been cut drastically – by roughly GH¢10 billion in the first five months of 2025 compared to the same period the year before. This significant spending reduction has been achieved through tough steps: delaying or suspending payments to contractors and suppliers, freezing new projects, and deferring certain policy programs until finances improve. In fact, it has been noted that as of mid-May 2025, the government had not issued any major new contracts or made significant payments on existing obligations, essentially instituting a spending freeze early in its term. Furthermore, the Ministry of Finance has halted the clearance of substantial arrears pending an audit – reportedly putting on hold about GH¢69 billion in outstanding payments that would otherwise add pressure to the system.

While such decisions are difficult and have socio-economic costs (contractors and workers facing delays, projects stalled), they directly and indirectly stabilize the currency. By cutting fiscal excess, the government lessens import demand and relieves the trade balance; by postponing large cedi outlays that might be converted to dollars, it reduces immediate pressure on the forex market. These measures, alongside tight monetary policy (the central bank policy rate was raised to 28% in March 2025 to curb inflation and stabilize the cedi), have helped restore a semblance of equilibrium. APL observes that this discipline and policy coordination – though born out of necessity – have bolstered investor confidence in the short term, contributing to the cedi’s appreciation. We encourage the government to institutionalize expenditure controls and anti-wastage reforms so that fiscal prudence outlasts the current stabilization phase.

Lessons from the 2017–2019 Period of Stability

It is instructive to compare today’s situation with Ghana’s last period of relative currency stability, between 2017 and 2019. During those years, the cedi’s exchange rate was much calmer – annual depreciation averaged in the single digits, a far cry from the steep decline of over 50% experienced in 2022 at the peak of the crisis. That earlier stability coincided with Ghana’s IMF Extended Credit Facility program (2015–2018) and a commitment to macroeconomic discipline. Fiscal deficits were reined in and inflation was on a downward path, which together anchored confidence in the cedi. Equally, external conditions were moderately favorable: Ghana was benefitting from rising oil production and relatively strong commodity prices, which supported foreign exchange earnings. Crucially, the central bank did not have to rely on extraordinary market interventions to keep the cedi stable – stability was largely a by-product of improved fundamentals and policy credibility.

The lesson for today is clear: sustainable exchange rate stability comes from sound economic management rather than one-off measures. The current administration can draw on this historical parallel by continuing structural adjustments initiated under the IMF program (e.g. fiscal consolidation, prudent debt management, and rebuilding of foreign reserves) to ensure the cedi’s strength is lasting. Just as the stability of the cedi contributed to a decline in debt ratios around 2017, maintaining that stability through robust policies now will reinforce Ghana’s economic resilience going forward. APL urges policymakers to view the 2017–2019 period not as an anomaly, but as a benchmark to surpass – through deeper reforms that address the root causes of cedi volatility.

Risks and Warnings for Long-Term Sustainability

While we applaud the recent appreciation of the cedi and the government’s resolve to stabilize the economy, APL cautions that short-term gains must not breed complacency. The current stability has been achieved in part by substantial interventions – drawing down reserves, selling gold, withholding payments, and benefitting from temporarily favorable externals (such as high gold and cocoa prices). These are, by nature, unsustainable stop-gap measures. Ghana cannot perpetually inject hundreds of millions of dollars each month or postpone critical obligations without consequences. Over-reliance on such interventions risks a sharp reversal if external financing buffers run thin or if deferred fiscal pressures (like unpaid contractors or looming debt maturities) eventually come due.

Indeed, analysts and international observers are already warning of a potential relapse of cedi weakness later this year as underlying structural issues resurface. S&P Global Ratings, after upgrading Ghana’s credit outlook in recognition of recent stability, pointed out that they “anticipate continued depreciation from the second half of 2025 as structural imbalances, inflationary persistence and fiscal constraints” reassert themselves. Similarly, Fitch Solutions, while noting the positive impact of gold-driven inflows, projects that current efforts will “not be enough to preserve the stability of the cedi for the entire year” and expects the currency to lose some ground by end-2025.

These insights underscore the central risk: if the cedi’s strength is propped up mainly by interventions rather than improvements in the economic fundamentals, it may prove temporary. APL therefore urges the government to double down on structural reforms. This includes diversifying the export base to boost non-traditional forex earnings, accelerating fiscal reforms to raise revenue and rationalize spending, and completing the ongoing debt restructuring to firmly anchor debt sustainability. Strengthening institutions and policy credibility – for example, through adhering to zero central bank financing of the deficit and enhancing transparency in reserve management – will also help entrench confidence in the cedi beyond the short term. The goal should be a scenario where the cedi is stable without continuous life support from the central bank, but instead through a self-sustaining balance of trade, investment, and sound monetary governance.

Conclusion and Policy Recommendations

In summary, Africa Policy Lens recognizes the notable macroeconomic turnaround that Ghana has experienced in the past several months. The Ghanaian authorities have managed to arrest the cedi’s decline and engineer an appreciation through a combination of innovative tactics and tough fiscal choices. These efforts have delivered immediate relief: inflation is moderating, currency expectations are improving, and business confidence is tentatively recovering. We commend the government and the Bank of Ghana for taking decisive action to stabilize the economy.

At the same time, we counsel vigilance. The true test of policy success will be measured by how well these gains endure into 2025 and beyond. To ensure the long-term resilience of the cedi, current policies must transition from emergency intervention to lasting reform. We encourage the government to capitalize on the breathing space afforded by the cedi’s appreciation: push forward with efficiency audits and expenditure reforms, implement growth-friendly policies that expand the export base (beyond gold and cocoa), and create a fiscal environment where Ghana lives within its means without sacrificing growth and social investments.

APL also emphasizes the importance of clear communication by policymakers. Market confidence can be fragile – sustained transparency about reserve usage, debt repayment plans, and economic strategy will help maintain credibility. In forging ahead, Ghana can take pride in the hard-won stability of its currency, but it must also heed the lessons of history. Short-term fixes, if not accompanied by deep-rooted changes, may only postpone problems. We urge a continued commitment to prudent, forward-looking economic management so that the cedi’s strength today becomes the foundation for long-term economic prosperity.