Ghana’s cedi has surged 19% against the US dollar over the past month, climbing from GH₵15.50 to GH₵13.05, driven by strong foreign exchange inflows and rising gold revenues.
However, Absa Bank warns the rally may be “too aggressive,” outstripping economic fundamentals despite bolstered reserves and improved investor confidence.
In a research note, Absa attributed the cedi’s rebound to robust gold and cocoa exports, strategic gold accumulation by the Bank of Ghana (BoG), and heightened FX inflows. Ghana’s net international reserves now cover 3.0 months of imports, up from 1.8 months a year earlier, reflecting the BoG’s shift to gold as a hedge against currency volatility. The establishment of the Ghana Gold Board (GoldBod) has further stabilized reserves by channeling export earnings into official coffers.
Global gold prices, hitting record highs of $3,300 per ounce, have amplified Ghana’s external revenues. Absa projects a 2025 current account surplus of 5.1% of GDP, supported by new mining projects like Cardinal-Namdini and Newmont’s Ahafo South expansion. Improved cocoa yields, buoyed by favorable weather, also contrast with regional struggles in Ivory Coast.
While optimistic about Ghana’s macroeconomic gains, Absa cautioned that sustaining the cedi’s strength requires alignment with underlying fundamentals. “Reserves should be supported by a healthy current account surplus,” the bank noted, stressing that overvaluation risks could undermine long-term stability if export performance falters.
The cedi’s rally underscores Ghana’s strategic pivot to commodities but highlights vulnerabilities to external shocks and commodity price fluctuations. Policymakers face the dual challenge of maintaining investor confidence while ensuring currency valuations reflect economic realities.
