The Cedi’s Comeback: Is the Rally Artificial?

By Prof. Samuel Lartey

sammylaatey@yahoo.com

Introduction

At the start of 2025, the Ghanaian cedi was expected to struggle under the weight of global uncertainties, domestic debt pressures, and the lingering aftershocks of COVID-era fiscal slippages. Yet, midway through the year, the currency has emerged as one of the world’s best performers, appreciating over 40% against the US dollar and gaining strength across major currencies. This dramatic turnaround has surprised traders, delighted importers, and sparked debate among economists: is the rally sustainable, or merely a temporary reprieve? Understanding the cedi’s newfound strength requires looking at Ghana’s external accounts, its policy shifts, the IMF program, and broader commodity dynamics, while disentangling hype from fundamentals.

Fundamentals Driving the Appreciation

1. Stronger External Balances

By mid-2025, Ghana recorded a US$3.4 billion current-account surplus, supported by a sharp rise in gold export earnings (up 76% year-on-year to US$5.2 billion in Jan–Apr). Gross international reserves hit US$11.1 billion, enough to cover 4.8 months of imports. These figures signal that, unlike past rallies built on speculation, the cedi’s strength this year is underpinned by hard flows of foreign exchange.

2. IMF Program and Debt Restructuring

Confidence is often more powerful than cash. Ghana’s successful restructuring of its Eurobonds in late 2024, coupled with the January 2025 Memorandum of Understanding with official creditors, sent strong signals of fiscal discipline. The IMF’s fourth program review in July 2025 further validated the country’s progress, anchoring market sentiment and assuring investors that reforms were on track.

3. Central Bank Discipline

The Bank of Ghana (BoG) maintained a tight monetary stance well into mid-2025, holding the policy rate high until inflation eased to 13.7% in June. Its decision to cut rates to 25% in July was interpreted not as weakness, but as confidence. Beyond interest rates, BoG’s interventions, including forward FX auctions, gold purchase programs, and tighter rules on FX cash movements, helped stabilize demand and reduce leakages in the market.

4. The Commodity Cushion

Global gold prices and Ghana’s expanding production capacity gave the cedi a natural shield. While cocoa has faced disease and climate headwinds, its partial recovery in 2025, coupled with strong remittances and non-traditional exports, added to the FX inflows.

Is the Rally Artificial?

The appreciation is not purely artificial. While policy interventions amplified the momentum, the gains rest on a foundation of improved external balances, restored confidence from debt deals, and stronger reserves. However, the cedi remains vulnerable to shocks: a sudden drop in gold prices, fiscal slippages, or a reversal of IMF discipline could quickly unwind the gains. Administrative measures have bought stability, but they cannot substitute for sustainable productivity growth and export diversification.

The Global Angle: BRICS and Trade Wars

Some commentators point to geopolitics, citing BRICS expansion or China–Russia trade dynamics. In truth, Ghana’s FX market remains largely USD-centric, and the cedi’s 2025 performance owes little to BRICS currency experiments. Instead, it is Ghana’s own discipline backed by gold and IMF reforms, that explains the surge. While global shifts may one day reshape trade invoicing, they are not the proximate drivers of this rally.

Sustaining the Gains for Ghanaians

For the appreciation to translate into real gains:

            •           Households should see slower inflation on imported goods and can seize the opportunity to prepay or refinance USD-linked debts.

            •           Businesses must reduce speculative USD hoarding, adopt hedging tools, and pass cost savings to consumers.

            •           Government must lock in credibility, keep fiscal deficits under control, expand the export base beyond gold and cocoa, and ensure reserves remain robust.

Conclusion

The cedi’s remarkable appreciation in 2025 is both a story of fundamentals restored and policies aligned. It reflects a convergence of external surpluses, credible IMF-backed reforms, and central bank interventions that have restored confidence. Yet, it is also a fragile story, one that depends heavily on gold prices and disciplined policy execution. If Ghana sustains fiscal prudence, diversifies exports, and continues building reserves, the cedi’s strength can become more than a fleeting rally. For households and businesses, this is not just about exchange rates, it is about rebuilding trust in the economy, lowering the cost of living, and creating a stable foundation for growth.