By Issah Olegor
The International Monetary Fund (IMF) has raised concerns over the Bank of Ghana’s (BoG) aggressive foreign exchange market interventions, warning that the central bank’s $1.4 billion forex injection in the first quarter of 2025, while effective in stabilising the Ghanaian cedi in the short term, is not a viable long-term strategy.
In its latest review of Ghana’s economic programme under the $3 billion Extended Credit Facility, the IMF acknowledged the rapid appreciation of the cedi—from GHC14.7 at the end of 2024 to a current rate of around GHC10.4 per US dollar, marking a 41.35% year-to-date gain.
This turnaround, according to the IMF, reflects “unprecedented” central bank support rather than a durable structural shift in the economy.
BoG’s Market Footprint: A Rising Trend
The $1.4 billion injected between January and March 2025 is nearly half of the $3 billion the central bank used to stabilise the cedi throughout 2024—and significantly higher than the $1 billion spent in 2023.
Notably, $2 billion of the 2024 injection came in the last quarter, which helped the currency firm up from a steep GHC16 to GHC14.7 by December.
With forex support continuing into 2025 at a record pace, market watchers and the IMF are expressing concern about the scale and sustainability of the BoG’s interventions.
IMF’s Prescription
While crediting the BoG for averting further depreciation amid high dollar demand, the IMF is now urging the central bank to reduce its dominance in the forex market and transition toward greater exchange rate flexibility.
“The current approach may deliver short-term stability,” the IMF said, “but without a clear, rules-based framework, it exposes the currency to potential volatility if inflows slow or external shocks arise.”
The Fund recommends that Ghana establish a formal and transparent intervention framework to guide forex market operations, thereby ensuring predictability and reducing reliance on discretionary or reactionary actions.
What’s Driving the Dollar Demand?
In response, Bank of Ghana officials have pointed to persistent structural pressures, especially from the energy sector, to justify the scale of recent interventions.
Ghana spends approximately $400 million monthly on fuel imports alone, amounting to roughly $1.2 billion in quarterly forex demand—almost equivalent to the amount spent by the BoG in Q1 2025.
Additionally, the country continues to service foreign currency obligations to independent power producers and the West African Gas Pipeline Company, all of which put immense pressure on reserves.
Despite the IMF’s warnings, the central bank maintains that its actions are underpinned by improved fundamentals.
Foreign reserves have now reached $10.6 billion—equivalent to 4.7 months of import cover—thanks to higher global gold prices, stronger cocoa exports, improved remittance flows, and the Bank’s domestic gold purchase programme.
Officials argue that as long as these inflows continue, the BoG is in a strong position to intervene when needed to protect macroeconomic stability.
Short-Term Gains vs Long-Term Stability
Still, analysts warn that the current model may crowd out private sector confidence and discourage investment in export diversification.
Heavy central bank presence in the FX market could distort pricing signals and delay needed reforms in Ghana’s foreign exchange regime.
The IMF has stressed that the priority must now shift toward building a market-oriented, transparent currency management system that can withstand future shocks such as declining commodity prices, remittance slowdowns, or climate-related impacts on cocoa production.
While the cedi’s recent gains have helped lower inflation and reduce the cost of imported goods, the path forward, the IMF says, must involve institutionalising forex policy with clear rules to secure the economy against volatility.
