Contemplating that 2025 is one other yr throughout which Ghana won’t have entry to the worldwide capital market, it is just to be anticipated that each members within the native financial system and worldwide direct traders can be nervous concerning the path and quantum of the change within the trade fee between the Ghanaian cedi and the USA greenback over the approaching months.
Certainly, they’ve good cause to fret. The relative trade stability loved by the cedi throughout the latter years of the earlier decade and the beginning of this one have been primarily achieved by heavy borrowing of US {dollars} within the type of annual Eurobond problems with US$3.0 billion, most of which was used to prop up the provision of overseas trade on the native forex market.
Nonetheless, when the three worldwide sovereign credit score rankings companies – Fitch, Moodys and Customary & Poors – all determined that Ghana’s public foreign exchange debt was unsustainable in the direction of the tip of 2022 and Bloomberg started justifying the resultant worth reductions and consequent sharp rise in yields on Ghana-issued Eurobonds to traders nonetheless holding on to them, the true value of this cavalier technique grew to become clear.
Since then, the worth of the cedi in opposition to the US greenback has fallen to barely a 3rd of what it was, with a greenback buying and selling for GHS15.56 by early April 2025 on the interbank foreign exchange market – and a considerably greater GHS16.10 on the retail market – in contrast with slightly over GHS16 to a greenback as on the third quarter of 2022. Notably, the cedi’s free fall continued via 2024, with the forex depreciating by 28% in opposition to the US greenback final yr alone.
However Ghana’s pivotal change of presidency from the erstwhile profligate Nana Akufo-Addo administration to the far more fiscally accountable incumbent President John Dramani Mahama administration, coupled with beneficial developments within the nation’s key worldwide commodity export markets have modified the trade fee trajectory sharply. Whereas the cedi nonetheless depreciated sharply throughout the first quarter of 2025 whereas the Mahama administration was settling in – by 5.36% in opposition to the greenback – this was adopted by marginal appreciation at first of April which narrowed the yr so far fall to lower than 3%, and relative trade fee stability since then.
Talking after the 123rd Financial Coverage Assembly in late March, Governor of the Financial institution of Ghana, Dr. Johnson Asiama, introduced a set of measures geared toward stabilizing the Ghanaian cedi, because the forex faces continued stress in opposition to main foreign currency.
These embody tightening financial coverage to manage inflation, enhancing overseas trade reserves and structural reforms to handle trade fee misalignment.
Dr. Asiama stresses the necessity for financial and financial coordination, inflation management, and structural reforms to revive confidence within the cedi.
“On prime of the projected regular progress for 2025, the worldwide markets have priced in a a lot stronger US financial system stemming from the insurance policies to be carried out by the brand new US administration. This has already instigated a stronger US greenback with implications for rising markets and growing economies, together with Ghana” he warns.
“Complementary fiscal and financial insurance policies will subsequently need to be rigorously set to stop spillovers to the Ghanaian financial system.
“Exterior sector situations stay constructive, with sustained and stronger-than-programmed rebuilding of reserve buffers contributing to the soundness of the home forex. The efficiency of the exterior sector (in 2024) was primarily pushed by sturdy progress in gold exports, which additionally largely impacted positively on progress. Within the outlook, the exterior sector is anticipated to stay sturdy as commodity costs stay beneficial amid enhancements in manufacturing. General, whereas the exterior sector situations are anticipated to offer an anchor to trade fee stability, key dangers within the outlook together with challenges within the power sector should be carefully monitored.”
Importantly, he’s backing his phrases with concrete motion. The Financial institution of Ghana supported the overseas trade market with US$264.4 million in March 2025 alone to protect the soundness of the cedi.
Certainly, such interventions replicate the rising measurement of Ghana’s gross worldwide reserves and the ensuing capability to each present foreign exchange liquidity within the native market and instantly intervene in it when deemed essential.
Simply the most important contributor to this newfound energy is gold, which is constantly setting new worldwide market worth data by the week. The value of a nice ounce of gold is at present round US$3,227 and is rising so quick that even Goldman Sach’s earlier forecast of a closing worth for the yr of over US$3,500 now seems a lot too conservative.
Aside from having fun with the direct advantages of the continuing unprecedented worth surge, it is usually encouraging funding in elevated manufacturing in Ghana and, extra not too long ago, concerted efforts by the brand new authorities to formalize small scale mining (most of which has been unlawful and environmentally unfriendly) and take management of the sale of the gold it produces, a lot of which has been smuggled out previously.
Databank Analysis expects the brand new authorities to prioritise home mining, boosting gold manufacturing to bolster reserves. In accordance with its Ghana Outlook report for 2025, “Within the aftermath of the elections, the brand new authorities might give attention to enhancing home mining corporations to spice up gold manufacturing. This comes at a time when gold reserves have been steadily rising in recent times, standing at 37.52 metric tonnes as of the second quarter of 2024, with projections indicating an increase above the degrees recorded in 2023. We imagine the transfer will additional increase gold reserves and provide a possible cushion for the Cedi.”
Oil costs are falling too however it is a double edged sword, favouring customers who may be capable to take pleasure in worth cuts on the pump on imported petroleum merchandise, and decrease diesel import prices for powering thermal electrical energy stations, however placing authorities’s foreign exchange income goal from crude oil exports in jeopardy.
Cocoa costs are nonetheless hovering not too far behind the over US$10,000 per ton they peaked ultimately yr and Ghana’s manufacturing seems set to exceed its 617,000 goal for the present crop season, however a few third of that is going into fulfilling provide contracts that the nation defaulted on throughout the earlier disastrous crop season.
Commodity costs on worldwide markets – and to a lesser extent, manufacturing – are outdoors the whole purview of presidency itself, however the Mahama administration is proving prudent within the fiscal administration and financial coverage measures that it may management and these are already yielding palpable outcomes which aren’t going unnoticed each at residence and overseas.
Databank Analysis predicts that political stability after the 2024 elections is anticipated to draw overseas direct funding (FDI) and portfolio inflows, easing speculative pressures on the cedi. Disciplined fiscal insurance policies are projected to strengthen this restoration.
“We count on a profitable 2024 election to carry renewed confidence within the Ghanaian financial system which ought to result in elevated overseas direct funding and portfolio inflows. This growth would bolster funding sentiments across the cedi and scale back speculative assaults on the forex,” Databank Analysis notes.
Certainly, following Ghana’s Eurobond debt restructuring in 2024, Moody’s and Fitch upgraded the nation’s rankings, with Moody’s transferring its issuer score from “Caa3” to “Caa2” and assigning a constructive outlook.
Databank additionally predicts additional upgrades as financial indicators enhance, strengthening the cedi.
“Following the profitable Eurobond debt rework within the third quarter of 2024, international score companies Moody’s and Fitch upgraded Ghana’s long-term native and overseas forex issuer rankings. Moody’s upgraded the issuer score from “Caa3” to “Caa2” and “Ca”, respectively, and assigned a constructive outlook,” Databank notes. “Fitch Options adopted with the upgrades, assigning a “CCC+” to Ghana’s new U
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