The Bank of Ghana has set up a committee to review the Foreign Exchange Act and related policies to fix challenges in the forex market.
Amid unofficial reports of intermittent forex shortages at the banks, currently fueling slight depreciation of the local currency (Ghana Cedi) against the major international trading currencies, especially the US dollar, at the banks while the black market maintains stable rates, the central bank has step up efforts to clean up the forex market and ensure a steady supply of foreign exchange to keep importers and exporters in business.
According to sources, commercial banks have been directed to suspend over-the-counter forex withdrawals in a bid to ease pressure on the market. This follows an initial directive instructing banks to stop Foreign Currency (FCY) cash withdrawals by large corporations unless backed by equivalent deposits.
This growing practice, particularly among bulk oil distributors and mining companies, the central bank says, has been draining FX liquidity and undermining efforts to stabilise the cedi.
However, under the new rule, all banks must provide documentation confirming the source of funds for every foreign currency payout.
“This practice exerts avoidable pressure on the foreign exchange market and undermines efforts to ensure stability. Accordingly, with immediate effect, all banks are directed to discontinue the payment of FCY cash to Large Corporates unless such transactions are fully supported by equivalent FCY cash deposits lodged by the same institution. Banks must retain proper documentation to confirm the source of funds for every payout”, a statement from the central bank noted.
Meanwhile, in a high-level meeting between Governor Dr. Johnson Asiama and the Importers and Exporters Association of Ghana, the Association also raised concerns over bank deductions on forex transactions and called for a review of the US$10,000 withdrawal cap, which it described as a major obstacle for genuine importers.
Consequently, the Association, while commending the central bank for stabilising the cedi and improving Ghana’s macroeconomic outlook, also appealed for further interventions to ease the burden on businesses.
The BoG, however, assured that it remains committed to supporting the operations of critical sectors such as petroleum supply and mineral exports.
It noted that, in partnership with the government, mechanisms are already in place to provide forex liquidity for legitimate import obligations of large corporations.
“These measures are designed to safeguard market stability while ensuring that vital supply chains remain uninterrupted. We expect all banks to comply strictly with this directive and to cooperate fully with the Bank of Ghana in ensuring that available foreign exchange resources are applied efficiently and transparently. Non-compliance will attract appropriate regulatory sanctions”, the release concluded.
Professor Godfred Bokpin of the University of Ghana Business School has expressed concerns about the Central Bank interventions in the foreign exchange market, warning that significant central bank involvement can lead to price distortion.
He believes a bank’s footprint in the market should not be so significant that it dictates prices, as this can undermine the price discovery mechanism that is essential for a well-functioning financial market. He emphasizes that the Bank of Ghana’s interventions should be limited to addressing volatility and maintaining stability in the market, rather than trying to control prices.
He noted that the central bank’s reserves are finite and that the economy’s underlying fundamentals, such as government spending and import levels, will ultimately determine the pressure on the reserves.
“You only have a fixed level of reserves, and your economy is not operating optimally… when the government begins to spend and import picks up, there will be pressure on our reserves”, Prof Bokpin noted while speaking on the sidelines at Prudential Bank’s Special Customer seminar on Cedi appreciation in Accra.
His comments highlight the need for careful consideration of the Bank of Ghana’s interventions in the foreign exchange market, balancing the need for stability with the risk of price distortion and the importance of allowing market forces to determine prices.
Cedi maintains steady footing against the dollar in 2025, buoyed by policy discipline and gold exports.
By Toma Imirhe & Elorm Desewu
Considering that 2025 is another year during which Ghana will not have access to the international capital market it is only to be expected that both participants in the local economy and international direct investors would be nervous about the direction and quantum of the change in the exchange rate between the Ghanaian cedi and the United States dollar over the coming months.
Indeed it would appear they have good reason to worry. The relative exchange stability enjoyed by the cedi during the latter years of the previous decade and the start of this one were primarily achieved by heavy borrowing of US dollars in the form of annual Eurobond issues of US$3 billion, most of which was used to prop up the supply of foreign exchange on the local currency market. However when the three international sovereign credit ratings agencies – Fitch, Moodys and Standard & Poors – all decided that Ghana’s public forex debt was unsustainable towards the end of 2022 and Bloomberg began justifying the resultant price discounts and consequent sharp rise in yields on Ghana-issued Eurobonds to investors still holding on to them, the real cost of this cavalier strategy became clear.
Since then, the value of the cedi against the US dollar has fallen to barely a third of what it used to be, with a dollar trading for GHc15.56 by mid April 2025 on the interbank forex market – and a significantly higher GHc16.10 on the retail market – compared with a little over GHc6 to a dollar as at the third quarter of 2022. Instructively the cedi’s free fall continued through to 2024, with the currency depreciating by 28% against the American greenback last year alone.
But Ghana’s pivotal change of government from the erstwhile profligate Nana Akufo-Addo administration to the much more fiscally restrained incumbent President John Dramani Mahama administration, coupled with favourable developments in the country’s key international commodity export markets have changed the exchange rate trajectory sharply. While the cedi still depreciated sharply during the first quarter of 2025 when the Mahama administration was settling in – by 5.36% against the dollar – this was followed by marginal appreciation at the start of April which narrowed the year to date fall to less than 3%, and relative exchange rate stability since then.
Speaking after the 123rd Monetary Policy Meeting in late March, Governor of the Bank of Ghana, Dr. Johnson Asiama, announced a set of measures aimed at stabilizing the Ghanaian cedi, as the currency faces continued pressure against major foreign currencies.
These include tightening monetary policy to control inflation, enhancing foreign exchange reserves and structural reforms to address exchange rate misalignment.
Dr. Asiama stresses the need for monetary and fiscal coordination, inflation control, and structural reforms to restore confidence in the cedi.
“On top of the projected steady growth for 2025, the international markets have priced in a much stronger US economy stemming from the policies to be implemented by the new US administration. This has already instigated a stronger US dollar with implications for emerging markets and developing economies, including Ghana” he warns.
“Complementary fiscal and monetary policies will therefore have to be carefully set to prevent spillovers to the Ghanaian economy.
“External sector conditions remain positive, with sustained and stronger-than-programmed rebuilding of reserve buffers contributing to the stability of the domestic currency. The performance of the external sector (in 2024) was mainly driven by strong growth in gold exports, which also largely impacted positively on growth. In the outlook, the external sector is expected to remain strong as commodity prices remain favourable amid improvements in production. Overall, while the external sector conditions are expected to provide an anchor to exchange rate stability, key risks in the outlook including challenges in the energy sector will have to be closely monitored.”
Importantly he is backing his words with concrete action. The Bank of Ghana supported the foreign exchange market with US$264.4 million in March 2025 alone to preserve the stability of the cedi.
Indeed, such interventions reflect the growing size of Ghana’s gross international reserves and the consequent ability to both provide forex liquidity in the local market and directly intervene in it when deemed necessary.
Easily the biggest contributor to this newfound strength is gold, which is continuously setting new international market price records by the week. The price of a fine ounce of gold is currently around US$3,227 and is rising so fast that even Goldman Sach’s earlier forecast of a closing price for the year of over US$3,500 now looks much too conservative.
Apart from enjoying the direct benefits of the ongoing unprecedented price surge, it is also encouraging investment in increased production in Ghana and, more recently, concerted efforts by the new government to formalize small scale mining (most of which has been illegal and environmentally unfriendly) and take control of the sale of the gold it produces, much of which has been smuggled out in the past.
Databank Research expects the new government to prioritize domestic mining, boosting gold production to bolster reserves. According to its Ghana Outlook report for 2025 “In the aftermath of the elections, the new government may focus on enhancing domestic mining companies to boost gold production. This comes at a time when gold reserves have been steadily increasing in recent years, standing at 37.52 metric tonnes as of the second quarter of 2024, with projections indicating a rise above the levels recorded in 2023. We believe the move will further augment gold reserves and offer a potential cushion for the Cedi.”
Oil prices are falling too but this is a double edged sword, favouring consumers who might be able to enjoy price cuts at the pump on imported petroleum products, and lower diesel import costs for powering thermal electricity stations, but putting government’s forex revenue target from crude oil exports in jeopardy.
Cocoa prices are still hovering not too far behind the over US$10,000 per ton they peaked at last year and Ghana’s production looks set to exceed its 617,000 target for the current crop season, but about a third of this is going into fulfilling supply contracts that the country defaulted on during the previous disastrous crop season.
Commodity prices on international markets – and to a lesser extent, production – are outside the complete purview of government itself, but the Mahama administration is proving prudent in the fiscal management and economic policy measures that it can control and these are already yielding palpable results which are not going unnoticed both at home and abroad.
Databank Research predicts that political stability after the 2024 elections is expected to attract foreign direct investment (FDI) and portfolio inflows, easing speculative pressures on the cedi. Disciplined fiscal policies are projected to reinforce this recovery.
“We expect a successful 2024 election to bring renewed confidence in the Ghanaian economy which should lead to increased foreign direct investment and portfolio inflows. This development would bolster investment sentiments around the cedi and reduce speculative attacks on the currency,” Databank Research notes.
Indeed, following Ghana’s Eurobond debt restructuring in 2024, Moody’s and Fitch upgraded the country’s ratings, with Moody’s moving its issuer rating from “Caa3” to “Caa2” and assigning a positive outlook.
Databank also predicts further upgrades as economic indicators improve, strengthening the cedi.
“Following the successful Eurobond debt rework in the 3rd quarter of 2024, global rating agencies Moody’s and Fitch upgraded Ghana’s long-term local and foreign currency issuer ratings. Moody’s upgraded the issuer rating from “Caa3” to “Caa2” and “Ca”, respectively, and assigned a positive outlook,” Databank notes.
“Fitch Solutions followed with the upgrades, assigning a “CCC+” to Ghana’s new USD bonds from the initial “CCC”. We expect a further upgrade as the rating agencies cited that continuous improvement in economic indicators would attract higher upgrades. We expect these developments to improve sentiments around the Cedi and allow for its stability,” the research firm predicts.
Inevitably quantitative forecasts for the cedi’s exchange rate performance against the US dollar vary from one forecasting firm to another, depending on the specific nature of their econometric modelling and trend analyses. But instructively none of the forecasts predict major depreciation during 2025.
Coin Codex, an American economic and financial forecaster expects that in 2025, the exchange rate between the US dollar and the Ghanaian Cedi is anticipated to range between GHc 15.06 and GHc 16.91, leading to an average annualized price of GHc 15.90.
World renown accounting and management consulting firm Deloitte predicts that in 2025, the improved investor confidence arising from the relatively peaceful election, the conclusion of the government’s debt restructuring negotiations, periodic International Monetary Fund (IMF) disbursements and higher gold export receipts will boost the international reserves level of the country and support the cedi’s value.
Gov Capital Forecasts expects the US dollar to exchange at GHc15.70 by the end of the third quarter of this year.
What all these forecasts have in common though is that the exchange rate will remain more or less stable through 2025 which means currency traders planning to take positions against the cedi – a major cause of cedi depreciation in the past – would be better off investing in government or Bank of Ghana bills which offer better returns on their investment.
