When a strong cedi hurts those who earn it

The cedi has enjoyed a rare period of stability in recent months, supported by improved foreign exchange inflows from gold, cocoa and oil exports as well as tighter monetary policy by the Bank of Ghana.

The firming of the local currency against major trading partners, especially the US dollar, has brought relief to importers and consumers weary of rising prices. Yet beneath this welcome development lies a growing unease among exporters.

A stronger cedi may appear as a sign of economic progress, reflecting investor confidence, lower imported inflation and improved debt servicing. For businesses that earn in foreign currency, it is a mixed blessing.

Exporters, particularly those in non-traditional sectors such as textiles, processed foods and crafts, are watching their profit margins shrink. When the cedi appreciates, their dollar earnings convert into fewer local returns, limiting reinvestment and dampening enthusiasm for expansion.

Cocoa, Ghana’s most valuable export, offers a clear example. Although global prices have climbed, the stronger cedi dulls the gains for local producers once the earnings are converted. Small-scale exporters, too, face a tougher battle for competitiveness as their goods become relatively more expensive abroad compared with those from countries with weaker currencies.

The Bank of Ghana’s determination to stabilise the cedi is vital for inflation control and macroeconomic credibility. Yet policymakers must also recognise that a perpetually strong currency could weaken the very sectors that keep the economy productive. Ghana’s long-term growth depends on exports, not merely on the short-term satisfaction of currency strength.

Government support must therefore tilt towards cushioning exporters through lower production costs, value addition and improved logistics. Strengthening the Ghana Export Promotion Authority’s initiatives and providing better access to affordable credit would help sustain the gains of a stable macroeconomy without suffocating export growth.

A stable cedi is welcome, but not if it comes at the expense of those who bring in the foreign exchange. Economic management should balance stability with competitiveness. The cedi’s strength will only be a true victory if it lifts both consumers and producers together.