For many in Ghana, the phrase "Cedi appreciation" has been a rare and welcome one. After periods of significant depreciation, the Ghanaian Cedi has recently shown remarkable strength against the US Dollar, a development that is bringing a sigh of relief to businesses and consumers alike.

As of today, May 22, 2025, the interbank rate for the Ghana Cedi is hovering around GH¢11.90 per US Dollar, a significant improvement from previous months where it touched highs above GH¢16. This upward trend isn't just a "nine-day wonder" but is underpinned by several strategic and timely factors.

So, what's fueling this positive turnaround for the Cedi?

• Robust Gold Reserves and Gold Purchase Program: A major driver is the Bank of Ghana's strategic accumulation of gold reserves. The Gold4Oil and now GoldBod initiatives have been instrumental, with the Central Bank significantly increasing its gold holdings. This strengthens the intrinsic value backing the Cedi and boosts foreign exchange buffers, reducing speculative pressures. The requirement for 20% of gold export proceeds to be converted into Cedis further stabilizes forex supply.

• Improved Fiscal Management and IMF Program: The government's efforts in fiscal discipline are paying off. Expenditure cuts, combined with the elimination of certain distortionary taxes, have enhanced fiscal credibility. The ongoing IMF Extended Credit Facility program has also restored economic confidence, with expected tranches of disbursement providing crucial support and signaling stability to investors.

• Temporary Suspension of External Debt Servicing: Under Ghana's debt restructuring program, the temporary pause in external debt repayments has provided significant breathing room. This alleviates pressure on foreign exchange reserves, allowing the Cedi to stabilize and gain ground.

• Strong Export Performance: Ghana's key exports, especially gold and cocoa, are fetching record prices on the international market. Gold has seen remarkable surges, and cocoa prices have also remained elevated. These increased foreign exchange inflows significantly boost dollar supply within the economy, easing pressure on the Cedi. The formalization of small-scale mining has also contributed to higher legal gold export volumes.

• Bank of Ghana's Direct Market Interventions: The Bank of Ghana has been actively intervening in the forex market, injecting significant amounts of dollars to support the currency's appreciation and ensure adequate supply to meet demand.

• Weakening US Dollar (Global Factor): It's also important to note that global economic shifts have played a role. The US Dollar itself has shown some weakening against a basket of currencies due to various international factors, which indirectly benefits emerging market currencies like the Cedi.

What Does This Mean for Businesses?

A stronger Cedi has several positive implications for businesses:

• Reduced Import Costs: For businesses heavily reliant on imported raw materials or finished goods, a stronger Cedi means lower import costs, potentially leading to reduced production expenses and, eventually, lower prices for consumers.
• Enhanced Planning and Stability: A more stable and appreciating currency reduces uncertainty, allowing businesses to plan investments and project costs with greater confidence.
• Improved Investor Confidence: A strengthening Cedi signals a healthier economic environment, attracting both domestic and foreign investors.

While the appreciation is a welcome development, it's crucial for businesses to monitor its sustainability. The full "pass-through effect" to consumer prices may take some time, as many businesses still hold old stock acquired at higher exchange rates. However, the current trend is undoubtedly a positive indicator for Ghana's economic outlook.

Let's continue to support policies that foster macroeconomic stability and sustainable growth for our nation!