Reduced public spending the reason for the Cedi’s recent strength – APL argues

Research and Policy Analysts, Africa Policy Lens (APL), has identified reasons for the Ghanaian cedi's strong performance in 2025. This follows a challenging year in 2024.

The cedi has appreciated over 20% against the US dollar this year. As of mid-May 2025, it trades at about GH¢13.5 to the dollar. This reflects a 17% gain since January.

APL credits this recovery to several factors. These include government measures like reducing public spending and suspending new projects. The freeze on clearing arrears has also eased pressure on the currency.

The Ministry of Finance has held back payments worth about GH¢69 billion pending audit. This action effectively curbs excess demand for foreign exchange.

The Bank of Ghana (BoG) has played a key role through strategic interventions. It used the Domestic Gold Purchase Programme (DGPP) to accumulate gold reserves. These reserves supported the cedi via gold-backed foreign exchange operations.

Between January and May 2025, the BoG injected nearly $1 billion into the forex market. This included $490 million in April and $264 million in March. These actions improved dollar liquidity and reduced depreciation pressure.

In a press statement on May 27, APL noted that these interventions provide short-term stability but may not be sustainable. They emphasized that drawing down reserves is not a long-term solution.

APL also pointed out external factors affecting the cedi's gains, such as a weakening US dollar amid global trade tensions.

Despite progress, APL warns against complacency from short-term gains. They stress the need for ongoing reforms to maintain momentum.

The group urges the government to implement permanent policy measures focused on fiscal discipline, export diversification, and institutional transparency.

“Short-term gains should not lull policymakers into inaction,” APL cautioned. “Sustainable growth requires deep structural reforms.”