Ghana Cedi’s recent gains may be temporary without deeper reforms – APL explains why

Africa Policy Lens (APL) is a policy research organization. It has praised Ghana’s recent macroeconomic progress. However, it warns that the cedi's appreciation may be temporary. This could happen without deeper structural reforms.

APL notes that the cedi appreciated significantly in early 2025. This rise was mainly due to temporary measures. The Bank of Ghana intervened heavily in the forex market, spending nearly $1 billion from January to May 2025. Tough fiscal decisions also played a role, such as freezing government spending and suspending arrears payments.

“These gains are encouraging but built on temporary pillars,” APL stated. The organization emphasizes that deeper reforms are needed for sustainability.

Ghana has experienced similar stability before, especially between 2017 and 2019. During this time, the IMF Extended Credit Facility program helped stabilize the cedi. Improved fundamentals and disciplined fiscal policies contributed to this stability.

APL suggests today’s policymakers should learn from that period. They should focus on long-term reforms instead of relying on short-term interventions. “Sustainable stability must be anchored in strong fundamentals,” APL added.

In a press release on May 27, 2025, APL highlighted potential risks if current strategies continue unchanged. Over-reliance on gold-backed interventions could backfire if commodity prices fall or external financing tightens.

“Short-term tools like gold-backed support leave the economy vulnerable,” APL warned. Analysts from S&P Global Ratings and Fitch Solutions have also raised concerns about potential cedi depreciation later in 2025.

“Global credit watchers are flagging risks; Ghana must act swiftly,” APL emphasized. The organization calls for stronger policy actions, including completing debt restructuring and diversifying export revenue sources.

Improved fiscal management is also crucial for maintaining investor confidence. “Reforms must be bold, and communication clear to avoid spooking markets,” APL stated.

In conclusion, while Ghana’s currency has shown impressive recovery, challenges remain. “The goal now is to preserve and build upon these gains.” Without long-term reforms, current stability may not last.