Reduced public spending the reason for cedi’s recent strength - APL argues

Research and Policy Analysts, Africa Policy Lens (APL), has noted key factors behind the Ghanaian cedi's rise in 2025. This comes after 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. The government implemented fiscal consolidation measures, including cutting public spending. They also suspended new projects and froze arrears clearance, reducing pressure on the currency. APL reported that the Ministry of Finance held back payments worth about GH¢69 billion pending audit.

The Bank of Ghana (BoG) has played a crucial role as well. Through its Domestic Gold Purchase Programme (DGPP), BoG accumulated gold reserves to support the cedi. Between January and May 2025, it injected nearly $1 billion into the forex market. This included $490 million in April and $264 million in March, improving dollar liquidity.

In a press statement on May 27, 2025, APL noted that these interventions provide short-term stability but may not be sustainable. They emphasized that using reserves and delaying payments are not long-term solutions. External factors also played a role; for instance, the US dollar weakened amid global trade tensions.

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. APL cautioned that sustainable growth requires deep structural reforms.