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| The cedi appreciated by 42% as of June 2025 |
The World Bank has issued a cautionary note to the Bank of Ghana (BoG) regarding its substantial interventions in the foreign exchange (FX) market, highlighting potential risks despite the Ghanaian cedi's remarkable performance in 2025.
According to the World Bank’s 9th Ghana Economic Update, released on August 14, 2025, in Accra, while the BoG’s actions have contributed to the cedi’s 42% appreciation against major currencies by June 2025, excessive interventions could distort market dynamics and undermine long-term economic stability.
Background: Cedi’s Strong Performance in 2025
The Ghanaian cedi has emerged as one of the world’s best-performing currencies in 2025, appreciating by 42.6% in the first half of the year, a sharp reversal from its 19.2% depreciation in 2024.
This appreciation has been driven by a combination of tighter monetary policy, fiscal consolidation, record reserve accumulation, and improved market sentiment.
The BoG’s interventions, including a reported $1.4 billion injection into the FX market in the first quarter of 2025, have played a significant role in stabilizing the cedi, which now trades between GH¢10 and GH¢11 on the interbank market.
The World Bank acknowledged these achievements, noting that Ghana’s gross international reserves reached $11.1 billion by June 2025, equivalent to 4.8 months of import cover, up from $8.98 billion at the end of 2024.
Strong external inflows, including higher gold and cocoa earnings, robust remittance inflows, and the BoG’s Gold for Reserves program, have bolstered this performance.
World Bank’s Concerns: Risks of Excessive Intervention
Despite these gains, the World Bank cautioned that heavy-handed interventions could lead to market distortions, drain reserves, and weaken economic resilience.
The report emphasized that while targeted interventions can smooth short-term volatility, excessive control risks undermining investor confidence and delaying the cedi’s natural adjustment to global and domestic conditions.
A more flexible exchange rate regime, the Bank argued, would enhance transparency, encourage better risk management by businesses, and support long-term economic stability.
The International Monetary Fund (IMF) echoed similar concerns in its recent review, urging the BoG to adopt a more rules-based and transparent intervention framework.
The IMF noted that the BoG’s $1.4 billion FX sales in Q1 2025 alone surpassed the total intervention for 2023, highlighting the scale of the central bank’s involvement.
Critics, including Professor Godfred Bokpin of the University of Ghana Business School, have pointed out that such interventions have fueled multiple exchange rates, creating discrepancies of up to 35% between interbank rates and those offered by forex bureaux.
Balancing Act: BoG’s Mandate and Market Realities
The BoG’s interventions are rooted in its legal mandate under the Bank of Ghana Act, 2002, and the Foreign Exchange Act, 2006, which empower it to promote currency stability and manage international reserves.
Supporters argue that in a small, import-dependent economy like Ghana, active FX management is essential to curb volatility and maintain market confidence, particularly in the wake of the 2022 sovereign debt crisis.
The BoG’s actions have helped achieve a trade balance surplus of $4.14 billion and a current account surplus of $2.12 billion in Q1 2025, driven by a 60.5% rise in exports.
However, the World Bank and IMF stress the need for a gradual shift toward market-driven exchange rates.
The BoG has already implemented reforms, such as competitive FX auctions and increased transparency in intervention disclosures, but analysts warn that sustained reliance on interventions could strain reserves if external inflows, particularly from gold and cocoa, weaken.
Broader Economic Context: Inflation and Banking Sector Reforms
The World Bank’s report also highlighted Ghana’s broader economic recovery.
Headline inflation declined to 13.7% in June 2025, marking six consecutive months of disinflation, driven by a tighter monetary policy rate of 28% and a stronger cedi.
However, the Bank urged the BoG to address persistent challenges in the banking sector, including high levels of non-performing loans (NPLs).
It recommended completing the recapitalization of financial institutions and conducting a comprehensive asset quality review to strengthen the sector’s resilience.
Looking Ahead: Policy Coordination and Sustainable Growth
As Ghana progresses under its IMF-supported Post-COVID-19 Programme for Economic Growth (PC-PEG), the World Bank underscored the importance of policy coordination between fiscal and monetary authorities.
Transparent exchange rate management and a robust banking sector are critical for sustaining investor confidence and private sector growth.
While the BoG’s interventions have been effective in stabilizing the cedi, a balanced approach that gradually reduces reliance on FX interventions will be key to ensuring Ghana’s economic recovery remains on track.
In conclusion, the World Bank’s warning serves as a reminder of the delicate balance between stabilizing the cedi and fostering a market-driven economy.
As Ghana navigates a challenging global environment, the BoG’s ability to adapt its strategies while maintaining its legal mandate will be crucial for sustaining the country’s hard-won economic gains.