Reduced public spending behind Cedi’s recent strength – APL

Research and Policy Analysts, Africa Policy Lens (APL), have noted key factors behind the Ghanaian Cedi's rise in 2025. After a tough 2024, the Cedi has appreciated over 20% against the US dollar this year. This makes it one of the best-performing currencies globally. As of early May 2025, the Cedi was trading at about GH¢13.5 to the dollar, reflecting a 17% gain since January.

APL credits this recovery to several factors. The government's fiscal measures include reducing public spending and suspending new projects. They also froze payments on arrears, which eased pressure on the currency. APL reported that the Ministry of Finance held back payments worth about GH¢69 billion pending audit. This effectively curbed excess demand for foreign exchange.

The Bank of Ghana (BoG) has also played a crucial role through strategic interventions. The Domestic Gold Purchase Programme (DGPP) allowed BoG to accumulate gold reserves. These reserves supported the Cedi via gold-backed foreign exchange operations. Between January and May 2025, BoG injected nearly $1 billion into the forex market. This included $490 million in April and $264 million in March.

In a press statement on May 27, 2025, APL noted that while these actions provided short-term stability, their sustainability is uncertain. They emphasized that drawing down reserves and delaying payments are not long-term solutions. APL also recognized external factors like a weakening US dollar amid global trade tensions contributing to recent gains.

Despite progress, APL warns against complacency from short-term gains. They stress the need for ongoing reforms and urge the government to maintain momentum with permanent policy measures. These should focus on fiscal discipline, export diversification, and institutional transparency. “Short-term gains should not lull policymakers into inaction,” APL cautioned. “Sustainable growth depends on deep structural reforms.”