According to IMF data tracked by Joy News Research, the Bank of Ghana (BoG) has injected about US$7.4 billion into the foreign exchange market to stabilize the cedi since 2022. It’s a huge effort, and in fairness, it has worked in the short term. But beneath the calm lies a more difficult question: is Ghana sustainably managing its foreign exchange?
These interventions have acted as shock absorbers, selling dollars to cool demand and smooth volatility. But every dollar sold is a dollar that leaves the reserves unless it’s replenished through exports or capital inflows. And Ghana’s main inflows; gold, oil, and cocoa, remain vulnerable to price and production shocks.
The current stability rests on a shaky base. Ghana still faces familiar vulnerabilities:
A narrow export base: Gold, oil, and cocoa dominate export earnings. When any of these stumbles, the cedi feels it immediately.
Limited reserves and underdeveloped FX market: The
central bank’s reserves can smooth short-term pressure but not absorb long shocks.
High external debt and FX repayment needs: Although the debt restructuring brought relief, Ghana still spends significant foreign exchange on interest payments.
Shallow export value-chains: Ghana earns little from processing its own raw commodities, limiting the FX retained per unit of export.
There’s a critical distinction between stabilization and reform. Selling dollars is a firefighting tool; reforming the economy’s foreign exchange structure is a rebuilding effort. True reform would mean diversifying exports, improving repatriation of export proceeds, attracting more stable FDI, and building clear rules around FX intervention. The IMF’s latest guidance even calls on BoG to “reduce its footprint in the foreign exchange market”. Until that happens, Ghana will keep returning to the same cycle: volatility → intervention → temporary calm → renewed pressure.
What Happens If the Commodity Cushion Fails? The recent strength of gold prices has been good, but what if gold exports fall, or cocoa production declines again? A dip in commodity inflows would quickly drain reserves, weaken the cedi, and force higher local prices. That is why the US$7.4 billion should be treated as breathing space, not a safety net, it’s the window for real work.
Credit: IMANI
