Cedi’s comeback: A turning point for the economy

After months of volatility and uncertainty, the Ghanaian Cedi has staged an impressive rebound, marking one of its strongest performances in recent times.

Over the past two weeks, the local currency appreciated sharply against all major trading currencies, signaling renewed market confidence, improved macroeconomic management, and effective policy interventions by the Bank of Ghana (BoG).

Between mid-October and late October 2025, the Cedi appreciated to GH¢10.85 per US Dollar (+9.68%), GH¢14.42 per Pound (+10.00%), and GH¢12.61 per Euro (+9.16%) on the interbank market.

The retail market mirrored this positive sentiment, with the Cedi advancing 6.53% against the US Dollar (closing at GH¢12.25 from GH¢13.05), 5.54% against the Pound (GH¢16.25 from GH¢17.15), and 5.26% against the Euro (GH¢14.25 from GH¢15.00).

This turnaround has sparked optimism across financial circles and reignited conversations about Ghana’s path to economic stability and resilience.

The Drivers Behind the Cedi’s Strength

The recent performance of the Cedi is not a coincidence—it reflects the combined effects of improved foreign exchange inflows, sustained central bank interventions, and positive market sentiment.

Bank of Ghana’s Interventions

The BoG’s consistent open-market operations, strategic foreign exchange sales, and tighter monetary policy have all contributed to easing pressure on the local currency. The central bank has maintained its policy rate at 29%, signaling its commitment to price stability and inflation control.

Improved External Conditions:

The disbursement of the second tranche of the IMF Extended Credit Facility (ECF) in September 2025 injected significant liquidity into the market, helping boost reserves. Ghana’s gross international reserves currently stand at about US$6.8 billion, covering roughly 3.1 months of imports—a critical buffer for the economy.

Export Performance and  Cocoa Receipts:

Early inflows from the 2025/2026 cocoa crop season and rising gold prices have supported foreign currency availability. Gold, Ghana’s leading export commodity, has benefited from global price hikes averaging US$2,400 per ounce this quarter.

Market Sentiment and Investor Confidence:

Investor optimism improved following the government’s successful domestic debt restructuring and ongoing talks with external creditors. These measures have helped stabilize fiscal expectations and moderate speculative demand for foreign exchange.

Ripple Effects on the Economy

The appreciation of the Cedi carries both direct and indirect impacts across government, businesses, and households:

 Government Finance and Fiscal Stability

A stronger Cedi reduces the local currency cost of servicing Ghana’s external debt, which remains significant at over US$29 billion. It also lowers import bills for government projects, freeing up fiscal space for development spending. Additionally, exchange rate stability helps anchor inflation expectations, crucial for effective policy planning and budget execution.

 Business Environment and Private Sector Relief

For businesses, particularly importers, the Cedi’s appreciation is a relief. Import-dependent sectors—such as manufacturing, pharmaceuticals, and consumer goods will see reduced input costs. Stable exchange rates also enhance pricing predictability and investment confidence, encouraging firms to plan medium-term strategies without fear of sudden currency depreciation.

Exporters, however, may face slightly lower margins in the short term due to currency strength, but the overall benefit of macroeconomic stability outweighs this temporary downside.

 Household Welfare and Living Standards

For households, a stronger Cedi translates into moderating inflation, particularly for imported goods and fuel. Ghana’s inflation, which eased to 27.5% in September 2025 from 29.8% in August, could decline further if the current currency momentum holds. Lower inflation improves purchasing power and reduces the cost of living—especially for lower-income families.

Lessons and Cautions Ahead

While the recent appreciation is encouraging, it must be viewed as a window of opportunity, not a signal for complacency. The government and central bank must consolidate the gains by:

• Deepening export diversification beyond cocoa and gold;
• Maintaining fiscal discipline to avoid renewed exchange rate pressures;
• Strengthening domestic production to reduce import dependency; and
• Enhancing confidence in local investment instruments.

Sustained stability will depend on structural reforms, especially in energy pricing, revenue mobilization, and public sector efficiency.

Seizing the Momentum

The Cedi’s comeback is more than a short-term market correction; it’s a symbol of economic resilience and policy credibility. If maintained, it could anchor inflation, improve business confidence, and ease fiscal stress—all vital ingredients for long-term growth.

For the average Ghanaian, a stronger Cedi means affordable goods, stabilized prices, and hope for economic recovery. For policymakers, it is a reminder that prudent management, transparent communication, and market confidence remain the most powerful currencies of all.

CREDIT:BNFT