BY Issah Olegor
The Ghana cedi is showing signs of modest stability this week after a turbulent two-week depreciation, with renewed confidence stemming from a US$360 million concessional loan approved by the World Bank and stronger central bank forex interventions.
On Monday, the cedi opened at GH¢13.60 to the dollar at forex bureaus, while on the interbank market it traded at GH¢12.20, offering some respite for importers and businesses who have endured rising exchange rate volatility in recent weeks.
A Brief Recovery After Weeks of Decline
The short-lived stability comes on the back of a steep decline in the local currency during the last two weeks of trading. In the interbank market, the cedi weakened from GH¢11.40 to GH¢12.15 per US dollar.
The retail market reflected even harsher realities, with the currency sliding 6.72% against the dollar, moving from GH¢12.55 to GH¢13.40 within the same period.
The cedi also lost significant ground against other major currencies.
The British pound surged to GH¢16.45 on the interbank market and GH¢17.60 at forex bureaus, while the euro strengthened to GH¢14.23 on the interbank market and GH¢15.45 at retail.
These losses translated into over 6% depreciation against both currencies.
What Triggered Pressure?
According to Databank Research, the recent depreciation was influenced by a combination of seasonal demand, weak investor sentiment, and delayed forex supply interventions by the Bank of Ghana.
The research firm further pointed to the impact of capital controls on FX transactions, which created delays in supply flows, intensifying pressure on the local unit.
“The marginal setback of the cedi, driven by heightened seasonal demand and weak sentiment, confirms our earlier expectations of near-term pressure during this period. We believe this trend was fuelled by bearish expectations, delayed FX supply interventions, and the drag from capital controls on FX transactions,” Databank explained in its assessment.
External Influences and Global Risks
While Ghana’s internal structural weaknesses remain a major driver of the cedi’s instability, external developments are also playing a key role.
The US Federal Reserve’s cautious rate cuts, in response to weaker labour market data, have impacted dollar flows globally, leaving emerging market currencies such as the cedi exposed.
These international dynamics, coupled with Ghana’s dependency on imports, have historically created recurrent cycles of depreciation.
For example, in 2022 and 2023, the cedi was ranked among the worst-performing currencies in Africa due to high inflation, ballooning external debt, and limited forex reserves.
World Bank Loan Provides A Cushion
The latest disbursement of US$360 million by the World Bank has temporarily boosted investor confidence, providing the Bank of Ghana with stronger forex support to stabilize the local currency.
Analysts say this intervention could ease pressure in the near term, especially as the government continues to negotiate with international partners under the ongoing IMF-supported programme.
Databank Research forecasts “modest stability as positive sentiment builds on the back of the World Bank’s concessional loan, with stronger FX support further anchoring this outlook.”
Year-to-Date Performance
Despite its recent struggles, the cedi has still managed to post a year-to-date appreciation of 16.29% against the US dollar, largely attributed to the IMF bailout and accompanying inflows from development partners earlier in the year.
However, currency watchers remain cautious, warning that this gain could erode quickly if structural reforms and fiscal discipline falter.
The Road Ahead
Market watchers will be closely monitoring the Bank of Ghana’s next Monetary Policy Committee (MPC) meeting, where decisions on interest rates could have a direct impact on currency movements.
Businesses, importers, and ordinary Ghanaians remain on edge, as the cedi’s volatility continues to shape the cost of living and overall economic stability.
