Bridgewater Insights | 11th February 2026
Ghana’s foreign exchange landscape has witnessed significant swings in recent years, culminating in the cedi’s status as Africa’s best-performing currency in the first eight months of 2025, with gains exceeding 30% against the U.S. dollar in the first half of the year. Yet the cedi’s trajectory reflects more than currency swings; it encapsulates issues of sovereign risk, trade performance, and broader macro-financial adjustments. The more compelling dimension of Ghana’s foreign exchange narrative lies in the ways the shifts intersect with trade flows, external debt dynamics, and fiscal sustainability.
Within the perspective of policy choices, cross-border financial spillovers, and structural constraints, the key question is whether Ghana’s exchange rate evolution can be aligned with the objectives of trade competitiveness, external debt sustainability, and sound sovereign finances.
Drivers and Trends of the Exchange Rate in Ghana
At the core of Ghana’s foreign exchange dynamics resides the interplay of the balance of foreign currency demand and supply, central bank actions, commodity-linked inflows, and broader macro-financial policies. Historically, Ghana’s foreign exchange market has come under recurrent strain arising from substantial external financing needs, particularly for debt servicing and import payments. The country’s trade surplus narrowed significantly from Gh¢11.4 billion in Q1 2024 to Gh¢7.3 billion in Q3 2024, driven by weakening portfolio inflows and 22% contraction in net FDI inflows between 2020 and 2024, which constrained access to foreign capital. These pressures intensified the cedi depreciation episodes, making 2024 one of the most challenging years for the cedi.
Against this backdrop, Bank of Ghana (BoG) adopted a more assertive stabilisation posture. During key stress periods in early 2025, it conducted regular foreign exchange auctions to commercial banks, enhanced regulatory scrutiny of currency bureaus, and directly injected foreign currency from its reserves into the market within its foreign exchange operations framework. BoG further reinforced its stance by tightening monetary policy in March 2025, raising the policy rate by 100 basis points to 28%, the first increase since July 2023, to anchor inflation expectations and bolster the cedi.
These policy actions gained traction in part because they coincided with a rebound in foreign exchange inflows from commodity exports, which remain a cornerstone of Ghana’s external stability. Earlier structured arrangements, such as gold-for-oil, provided a reliable channel for inflows and consequently, gross international reserves rose from US$8.982 billion at end-2024 to US$11.526 billion by Q3 2025, providing nearly five months of import cover and reinforcing confidence in the currency. This improvement played a central role in the cedi’s appreciation from Gh¢15.59/US$ in Q4 2024 to Gh¢11.08/US$ in Q3 2025. The launch of the state-run GoldBod in March 2025 further supported the recovery by centralising gold trading and ensuring that foreign exchange proceeds remained within the formal banking system rather than leaking through informal channels.
Exchange Rates, International Trade, and Domestic Production
Ghana’s foreign exchange dynamics have direct and far-reaching implications for trade flows, domestic production, and competitiveness. When the cedi depreciates, the cost of imported goods rises in local currency terms. Given Ghana’s high dependence on imported consumables, capital equipment, and energy inputs, businesses face higher production costs and thinner profit margins in seasons of cedi depreciation. These pressures have the propensity to force firms to scale back activities, while households absorb higher retail prices, thereby feeding inflationary pressures. Yet the same depreciation also curtails import demand and improves the relative competitiveness of domestic producers, particularly in sectors with sufficient local production capacity, fostering a degree of self-reliance.
Conversely, when the cedi appreciates, imports become cheaper, and input-driven inflation eases. While this supports consumers and firms reliant on imported inputs, it undermines domestic manufacturing as lower-priced imports gain market share. Thus, a stronger cedi creates a delicate tension: it stabilises prices of imported products but may erode incentives for local production.
On the export side, Ghana’s major commodities, such as gold, cocoa, and oil, play a central role in shaping foreign exchange liquidity. High global commodity prices generate strong foreign exchange inflows, supporting reserves and reinforcing currency stability. This dynamic has been particularly evident in 2025 as a 47% surge in global gold prices within the first nine months of the year contributed to a 28% increase in Ghana’s reserves and a corresponding 28% reduction in the cedi–dollar rate over the same period. However, this relationship is not unidirectional. A sustained appreciation of the cedi eventually weakens export competitiveness as the cedi value of export earnings declines, potentially slowing activity in export-driven sectors.
Figure 1: International trade, foreign exchange, and external debt
Exchange Rates, Sovereign Debt Burden, and Indirect Effects on Public Revenue
Currency movements are equally central to the sovereign debt narrative in Ghana, influencing both debt sustainability and fiscal space.
Ghana’s debt burden has expanded rapidly over the past five years, increasing the economy’s sensitivity to exchange-rate movements. Total public debt increased by 131% from Gh¢315.1 billion in 2020 to Gh¢726.5 billion in 2024, while external debt grew even faster, rising by 168% from Gh¢155.5 billion to Gh¢416.8 billion over the same period. This growing reliance on foreign currency borrowing, juxtaposed against revenues largely generated in cedi, exposes the country to significant currency risk. When the cedi depreciates, the local-currency cost of servicing external debt rises. In Q4 2024, for instance, Ghana’s external debt stock declined by 12% in United States Dollar (USD) terms, yet the reduction in cedi terms was 11%, with the 1% differential attributable to the 3% depreciation in the cedi over the same period.
The recent appreciation of the cedi has, however, provided notable relief in Ghana’s external debt burden. In the first three quarters of 2025, external debt in USD terms increased modestly by 3% to US$88 billion, but the domestic-currency value of this debt fell by 24% to Gh¢1,005 billion, driven by a 28% concurrent appreciation of the cedi. A stronger cedi lowers the local-currency cost of external debt payments, freeing fiscal space that can be redirected toward public investment or used to reduce the need for additional borrowing. Improved foreign exchange stability can also bolster investor confidence, enhance access to concessional financing, and reduce borrowing risk premia. As Ghana consolidates its debt and refines its financing strategy, these easing pressures create opportunities to step-up allocations to both social and productive sectors. Nonetheless, the benefits of currency appreciation have to be interpreted cautiously from other perspectives. If the appreciation is driven by temporary factors such as short-lived commodity windfalls or transitory central bank interventions, the gains may prove reversible, potentially reinstating fiscal strain.
Conclusion
The Cedi’s recent rally is not a random walk but points to the outcomes of deeply coordinated monetary interventions and a reinvigorated fiscal commitment. The consolidation of the foreign exchange gains into real impact development largely depends on continued policy discipline, structural reforms to diversify export bases, prudent debt management, and vigilance against potential reversals. If Ghana can maintain this balance, it stands to leverage its improved foreign exchange position into stronger growth, a more stable macroeconomic trajectory, and higher living standards for the citizens.
