In a significant economic development, Ghana's cedi has recorded its most robust performance in the first 120 days of President John Dramani Mahama's second term, outperforming all previous administrations since the currency's redenomination in 2007. Between January 7 and May 7, 2025, the cedi appreciated by 9.25%, strengthening from GH¢14.71 to GH¢13.35 against the US dollar.
Factors Contributing to the Cedi's Appreciation
Several elements have contributed to this notable currency performance:
- Global Economic Shifts: A worldwide move away from the US dollar, especially among BRICS nations and certain African economies, has lessened the dollar's dominance. This trend, coupled with increased use of alternative currencies in trade, has provided emerging market currencies like the cedi with a more favorable environment.
- Bank of Ghana's Interventions: The central bank has actively supported the cedi by injecting dollars into the market, particularly aiding Bulk Oil Distributors in importing petroleum products. This strategy has stabilized forex expectations and ensured a steady supply of foreign currency.
- Fiscal Discipline: Unlike previous transitions characterized by heightened government spending, the current administration has exercised fiscal restraint. This approach has curbed cedi liquidity and helped manage inflationary pressures.
- IMF Support: Ghana's ongoing $3 billion program with the International Monetary Fund has bolstered macroeconomic confidence. The IMF's emphasis on expenditure control, revenue mobilization, and structural reforms has reassured investors and markets.
- Increased Foreign Reserves: The country's gross international reserves have risen to over $9.3 billion, up from approximately $6.1 billion the previous year. This increase provides the Bank of Ghana with greater capacity to defend the cedi against speculative attacks.
- Export Growth: Despite a downturn in oil export revenues, gold exports have surged, with cumulative revenue reaching $2.3 billion in the first two months of the year, compared to $1.4 billion during the same period last year. Cocoa export revenues are also showing signs of recovery post-COVID.
Looking Ahead
President Mahama's administration has pledged to continue focusing on economic stability. Plans include holding a National Economic Dialogue within the first 120 days to develop a four-year fiscal consolidation program. This initiative aims to further strengthen the economy and maintain the positive trajectory of the cedi.
Conclusion
The cedi's impressive performance in the early days of President Mahama's second term reflects a combination of strategic policy decisions, global economic trends, and effective fiscal management. As the administration continues to implement measures aimed at sustaining this momentum, the outlook for Ghana's economy and its currency remains optimistic.
