The Ghanaian cedi has begun 2025 with a notable depreciation of approximately 2% against major trading currencies, highlighting persistent challenges in stabilising the local currency. According to the Bank of Ghana’s most recent Summary of Economic and Financial Data, the cedi has weakened by 2.4% against the US dollar, 3.0% against the Euro, and 0.8% against the British Pound as of January 2025.
The exchange rates recorded stand at GHS 15.06 per dollar, GHS 15.69 per Euro, and GHS 18.55 per pound.
However, market realities show that forex rates are higher than these official figures, with the dollar trading between GHS 15.90 and GHS 16.20. These higher rates are increasing the cost of imports and external transactions, further straining businesses and households that rely on imported goods. The implications are particularly severe for sectors that depend heavily on foreign inputs, such as manufacturing, construction, and retail. Rising costs are expected to trickle down to consumers, compounding the financial difficulties already faced by many Ghanaians.
The cedi’s depreciation is largely attributed to heightened demand for foreign exchange. Import activities, external debt servicing, and other dollar-driven transactions have placed immense pressure on the local currency. Additionally, external factors such as tightening global financial conditions have created a challenging environment for emerging markets like Ghana. Higher interest rates in advanced economies, particularly the United States, have drawn investment away from developing countries, further exacerbating the situation.
Domestically, fiscal imbalances and high inflation are compounding the situation. These challenges, coupled with limited foreign exchange reserves, have made the cedi vulnerable to market pressures. The exchange rate fluctuations also reflect a broader set of economic issues that Ghana continues to grapple with, including a high public debt burden and a persistent trade deficit.
The depreciation comes at a time when Ghana’s economy is already under significant strain. Inflation remains elevated, with food and fuel prices continuing to climb, eroding the purchasing power of the average Ghanaian. For businesses, the higher cost of foreign exchange translates into increased operational expenses, which are often passed on to consumers in the form of higher prices for goods and services. The ripple effects are felt across all sectors, creating a challenging environment for economic recovery.
To address these challenges, the government and the Bank of Ghana are expected to focus on measures to boost foreign exchange reserves. Strengthening the country’s reserve position is seen as critical to mitigating short-term pressures on the cedi and maintaining investor confidence. Reserves play a vital role in cushioning the economy against external shocks, providing the central bank with the necessary resources to intervene in the forex market when needed.
Beyond this, structural reforms are being called for to create a more resilient economy. Industry players have suggested that diversifying Ghana’s export base could significantly improve the country’s foreign exchange earnings. Overreliance on a few key exports, such as gold, cocoa, and oil, has left the economy vulnerable to price fluctuations in global markets. Expanding into other export sectors, such as agriculture, manufacturing, and technology, could provide a more stable and diversified revenue stream, helping to reduce the pressures on the local currency.
Another recommendation involves reducing the country’s dependency on imports. By promoting local production and substituting imported goods with domestic alternatives, the demand for foreign exchange could be significantly reduced. For instance, investing in agriculture to boost local food production could lessen the reliance on imported food items, while supporting local industries could lead to the production of goods that are currently imported. This approach requires a coordinated effort between the government, private sector, and development partners to create an enabling environment for businesses to thrive.
Prudent fiscal policies are also seen as vital to stabilising the currency. Ensuring that public spending is carefully managed and directed toward productive sectors could enhance economic growth while reducing fiscal deficits. Additionally, tackling inflation through monetary policy interventions would be key to preserving the cedi’s purchasing power. The Bank of Ghana’s monetary policy efforts, such as raising interest rates to curb inflation, must be complemented by fiscal discipline to achieve long-term stability.
Despite these potential measures, experts warn that the cedi’s performance will likely remain a critical indicator of Ghana’s economic health throughout 2025. The ability to stabilise the currency will not only reflect progress in addressing fiscal and monetary challenges but also signal broader improvements in the economy’s overall resilience. Maintaining stability in the exchange rate is not merely about economic numbers—it directly impacts the livelihoods of millions of Ghanaians.
As the year progresses, all eyes will be on the government and the central bank to implement effective strategies that can curb the cedi’s depreciation. The road to stabilisation may be difficult, but with a combination of short-term interventions and long-term structural reforms, Ghana could work toward a more stable currency and a stronger economy. The importance of a collaborative approach cannot be overstated. Policymakers, industry players, and financial institutions must come together to chart a path forward.
The cedi’s depreciation recorded at the start of 2025 underscores the challenges ahead but also serves as a call to action for a concerted national effort. With the right policies in place, Ghana has the potential to navigate these difficulties and emerge with a more stable and sustainable economic framework. The journey will not be without obstacles, but the resilience and determination of Ghanaians can serve as a foundation for overcoming these challenges.
The cedi’s performance in 2025 will undoubtedly be a key measure of the country’s ability to adapt and respond to both internal and external pressures. It will also serve as a reminder of the importance of economic diversification and prudent policy decisions in building a resilient future.
