The Bank of Ghana (BoG) sold an unprecedented $1.4 billion in foreign exchange in the first quarter of 2025 to stabilise the cedi, according to a new report by the International Monetary Fund (IMF).
The forex intervention for the second quarter has not been disclosed.
This aggressive market intervention is already nearly half of the total $3 billion the BoG deployed across all of 2024 and far exceeds the $1 billion in interventions made in 2023.
Of the $3 billion injected in 2024, $2 billion was injected in the last quarter, which saw the Cedi appreciate from GH₵16 to end the year at GH₵14.7.
BoG’s additional injection of $1.4 billion accelerated the appreciation of the Cedi, moving it to GH₵10.4 to the Dollar currently.
This represents a year-to-date appreciation of 41.35%.
Indicative open market rates at the close of last week stood at GH₵10.55 to the Dollar, GH₵14.36 against the British Pound, and GH₵12.43 to one Euro.
The IMF, in its latest review of Ghana’s economic programme, acknowledged the cedi’s recent appreciation as a sign of effective short-term management, but warned of the risks of overreliance on heavy forex injections.
“The scale of intervention by the Bank of Ghana in 2025 is unprecedented,” the IMF stated.
“This suggests a continuation of the Bank’s active management strategy, but also underscores the risks of overreliance on such measures.”
IMF urges BoG to reduce market dominance
While applauding the BoG’s ability to defend the cedi amid persistent dollar demand, the IMF is calling for a significant shift in how the central bank approaches foreign exchange operations. The Fund has urged the BoG to reduce its dominance in the FX market and adopt greater exchange rate flexibility to cushion the economy against future external shocks.
“The current approach may deliver short-term stability,” the report observed, “but without a clear rules-based framework, it exposes the currency to potential volatility if inflows slow or external shocks arise.”
The IMF is strongly recommending the creation of a formal, transparent internal intervention framework that will ensure predictability and accountability in forex market activities—reducing the need for ad hoc or reactionary interventions.
Energy sector drives FX demand
Central Bank officials, responding to the IMF’s concerns, attributed the first quarter 2025 intervention to structural factors—particularly persistent dollar-denominated obligations in Ghana’s energy sector.
Every month, Ghana must settle large foreign currency bills related to fuel imports and payments to independent power producers and other energy suppliers.
Among these is the West African Gas Pipeline Company, a key supplier of natural gas to Ghana’s power plants.
Fuel imports alone are estimated to cost about $400 million per month, adding up to roughly $1.2 billion in demand per quarter, strikingly close to the $1.4 billion spent by the BoG between January and March 2025.
Foreign reserves hit $10.6 billion
Despite the IMF’s caution, the BoG appears confident that its actions are sustainable, at least in the short term.
Thanks to high international gold prices, a rebound in cocoa earnings, increased remittances, and expanded domestic gold purchases under the Bank’s gold-buying programme, Ghana’s foreign reserves have surged to $10.6 billion.
This represents about 4.7 months of import cover—well above the IMF’s recommended threshold.
This substantial buffer has emboldened the central bank to continue defending the cedi more aggressively, especially given the macroeconomic stability gains seen so far in 2025.
BoG officials believe that as long as inflows from gold, cocoa, and remittances remain strong, the central bank can afford to lean into the FX market when necessary.
A balancing act between stability and sustainability
However, the IMF insists that the current intervention-heavy model, while effective in the short term, is not sustainable in the long run.
The Fund has urged Ghana’s economic managers to balance exchange rate stability with the need to build market confidence through transparency and clear policy rules.
As Ghana prepares for potential external risks—such as global oil price shocks, slowing remittance inflows, or reduced cocoa output due to climate volatility—the need for a structured forex market strategy has become even more critical.
While the BoG’s interventions have so far helped tame inflationary pressures and brought down the cost of imported goods, analysts caution that overdependence on central bank forex sales can discourage long-term investment in export diversification and undermine private sector confidence in the exchange rate regime.
For now, the cedi remains on solid ground. But as the IMF’s warning makes clear, unless Ghana moves swiftly to institutionalise a rules-based FX management framework, the gains could prove fragile in the face of future economic storms.
