Ghana Cedi Strengthens by Over 11% Against US Dollar in May

KEY POINTS

• Ghana’s cedi appreciated 10.9% against the US dollar in mid-May 2025, driven by central bank rate hikes, dollar injections, and delayed government spending.
• Analysts debate whether the surge stems from domestic reforms or global factors like the US-China trade tensions and Ghana’s gold-backed reserve strategy.
• The rally offers relief for importers and consumers but raises concerns among exporters about reduced international competitiveness.

The Ghanaian cedi has shown a notable appreciation against the United States dollar, gaining more than 11 percent in value during the first half of May 2025, according to data released by the Bank of Ghana.

Between May 2 and May 19, the cedi improved from a mid-rate of GH¢13.8 to GH¢12.3, marking a significant recovery amid broader economic adjustments and currency volatility. This shift represents an appreciation of approximately 10.9 percent, a trend not seen in recent months given the pressure the cedi has faced historically against the dominant US currency.

“The strengthening of the cedi is a positive sign and reflects the success of recent monetary interventions,” said Dr. Zakaria Mumuni, First Deputy Governor of the Bank of Ghana.

Central Bank policies and external forces fuel recovery

According to financial analysts and policymakers, multiple factors have contributed to the cedi’s rebound. These include both internal monetary reforms and global market dynamics. Dr. Mumuni pointed to the Bank of Ghana’s aggressive liquidity management approach—particularly the tightening of monetary policy and interest rate hikes—as central to the currency’s performance.

Dr. Kabiru Mahama, Member of Parliament for Walewale, also credited the appreciation to the injection of over $492 million into the market by the Central Bank, which increased dollar availability and improved confidence in the local currency. He emphasized that “the government’s decision to refrain from spending in the first quarter helped reduce demand-side pressures on the foreign exchange market.”

Beyond domestic efforts, the Ghana International Trade and Finance (GITF), a reputable investment advisory agency, highlighted that the cedi’s appreciation was also influenced by international developments.

“Investors began offloading US assets due to ongoing trade tensions between the US and China, which inadvertently created a favorable condition for emerging market currencies like the cedi,” the GITF reported.

Additionally, the GITF praised the impact of Ghana’s Gold Board initiative, which has contributed to the country’s foreign reserves. The increase in reserves is seen as another key pillar that has supported the cedi’s value in recent weeks.

Ghana Business News reports that despite the positive trend, market observers caution that the foreign exchange market remains volatile. A sustained appreciation would require continued fiscal discipline, stable macroeconomic policies, and favorable external conditions.

“We must remain cautious, as short-term gains can be reversed by shifts in global capital flows or domestic fiscal slippages,” warned economist Emmanuel Adjei, noting that historical trends show how quickly the cedi can depreciate under pressure.

The Bank of Ghana has reiterated its commitment to maintaining monetary stability and ensuring that the recent gains are not short-lived. The next monetary policy report is expected to further shed light on the sustainability of the current appreciation trend.