Professor Eric F. Oteng-Abayie, an economist and economic policy analyst at the Kwame Nkrumah University of Science and Technology (KNUST), has linked the recent strengthening of the Cedi to a combination of domestic policy reforms and advantageous global economic circumstances.
He noted that the Cedi’s impressive appreciation of approximately 16% against the US dollar by April 2025 can be attributed to strategic initiatives such as the Bank of Ghana’s Gold4Oil and GoldBod programs, alongside significant fiscal discipline under the IMF-supported economic recovery plan and increasing investor confidence.
‘The recovery of the Cedi is not a mere coincidence; it stems from intentional policy decisions, particularly the Bank of Ghana’s Gold4Oil and GoldBod initiatives, which have greatly enhanced foreign exchange reserves and investor trust,’ he remarked.
The Bank’s mandate requiring that 20% of gold export revenues be converted into cedis, coupled with a $490 million intervention in the foreign exchange market in April, has contributed to stabilizing foreign exchange supply and strengthening the local currency.
He also mentioned the temporary halt of external debt repayments and the improvement of Ghana’s credit rating from Selective Default to CCC+ as additional factors. ‘Ghana’s fiscal consolidation under the IMF program, which includes the elimination of distortionary taxes such as the E-levy and COVID-19 levy, has further solidified the economy’s credibility,’ he added.
These initiatives, along with robust export performance—particularly in gold and cocoa, which have reached record prices—have significantly enhanced Ghana’s balance of payments and foreign exchange inflows. On a global scale, the decline of the US dollar due to trade tensions and economic uncertainties has created a favorable environment for the Cedi’s recovery, with the US dollar index (DXY) depreciating by approximately 10% since January, benefiting numerous emerging markets, including Ghana.
The depreciation of the US dollar, driven by concerns over a global recession and trade conflicts, has benefitted Ghana. Concurrently, unprecedented prices for gold and cocoa have enhanced our export revenues,” he stated.
Nevertheless, Prof. Oteng-Abayie warned that despite the Cedi’s appreciation resulting in a decrease in inflation to 21.2% by April 2025, the average Ghanaian has not yet experienced this change in their everyday lives due to ongoing price rigidity.
“We are witnessing a typical instance of price rigidity, where prices rise swiftly during currency depreciation but decline slowly even when the Cedi strengthens,” he noted.
He elaborated that businesses are hesitant to lower prices, pointing to uncertainties regarding the currency’s stability, elevated operational costs, and long-term cost structures established during inflationary times.
The economist compared the current situation to historical instances in 2007 and 2017, where efforts to stabilize the currency did not provide widespread consumer relief due to structural limitations.
“The present circumstances reflect past situations, such as those in 2017 and 2007, where mere currency stabilization was insufficient. Without structural reforms, the benefits are frequently temporary,” he commented.
He emphasized the necessity for policy initiatives to alleviate domestic cost pressures, foster market competition, and diversify Ghana’s economy beyond commodities to secure enduring benefits.
In his suggestions, Prof. Oteng-Abayie advocated for sustained fiscal discipline, reforms in the energy sector, development of transport infrastructure, enhanced market regulation, and increased local production capacity.
“To achieve long-term stability, Ghana must address domestic cost pressures, invest in infrastructure, strengthen market regulation, and diversify its economic foundation beyond commodity exports,” he recommended.
He also called on officials to transparently manage public expectations and facilitate gradual price changes, particularly in sectors reliant on imports.
In 2025, the Cedi emerged as one of the top-performing currencies globally, rebounding from a tumultuous 2024 during which it depreciated by almost 24%.
The 16% increase this year has aligned with a decrease in inflation and enhanced macroeconomic confidence, presenting an opportunity for more profound reforms aimed at achieving sustainable economic stability.
