The Ghana Cedi's Volatile Journey Against the Dollar from 2024 to May 2025

The Ghanaian cedi’s performance against the US dollar from 2024 to May 2025 has been a tale of sharp declines, persistent challenges, and a surprising recovery. This period of volatility has kept Ghanaians, policymakers, and investors on edge, with the exchange rate impacting everything from inflation to the cost of everyday goods. In this blog, we’ll explore the cedi’s journey, the reasons behind its fluctuations, the role of Vice President Mahamudu Bawumia’s gold buying plan, and whether US policies under President Donald Trump have played a part. We’ll also highlight what Ghanaians need to know to navigate this economic landscape.

The Cedi’s Performance: A Snapshot

2024: A Year of Depreciation

In 2024, the Ghanaian cedi faced significant pressure, depreciating by 19.6% against the US dollar by July, according to the Bank of Ghana. By November, the exchange rate reached a low of 16.0900 GHS per USD, marking a year-to-date decline of 23.3%. This made the cedi one of the world’s worst-performing currencies, fueling inflation to 22.8% in June 2024. The rising cost of imports, particularly fuel and consumer goods, hit households and businesses hard, increasing the cost of living and operational expenses.

2025: Signs of Recovery

Fast forward to May 13, 2025, and the cedi has shown remarkable resilience. The exchange rate improved to 12.6100 GHS per USD, reflecting a 2.316% daily gain and an 8.291% increase over the past week. Forecasts for 2025 suggest the USD/GHS rate could range between 6.97 and 13.10, with an average annualized rate of 9.55 GHS. Some analysts predict further appreciation, potentially dropping below 13.00 GHS, driven by strong foreign exchange inflows and central bank interventions. This recovery offers a glimmer of hope, but the cedi’s volatility remains a concern.

Historical Context

To put this in perspective, the cedi has faced long-term depreciation. From 2017 to 2023, it lost 64.6% of its value against the dollar, compared to 71.1% from 2009 to 2016. The 2024–2025 period reflects ongoing structural challenges but also recent stabilization efforts that have started to bear fruit.

Why Has the Cedi Been So Volatile?

Several factors have driven the cedi’s fluctuations, from global economic trends to domestic policy challenges.

1. Global Economic Shocks

• Commodity Prices and Trade Imbalances: Ghana’s economy relies heavily on exports like cocoa, gold, and oil. Falling cocoa prices and rising fuel costs, exacerbated by global events like the Russia-Ukraine war and post-COVID supply chain disruptions, weakened the cedi in 2024. Higher import costs strained the trade balance, increasing demand for dollars.

• Capital Outflows: As the US Federal Reserve raised interest rates in 2022–2024, investors pulled capital from emerging markets like Ghana to safer assets like the US dollar. This strengthened the dollar globally, putting downward pressure on the cedi.

• US Tariff Policies: Recent posts on X suggest that a perceived weakening of the US dollar, possibly due to President Trump’s proposed tariff policies, may have alleviated pressure on the cedi. A weaker dollar reduces the relative cost of imports for Ghana, supporting the cedi’s recent gains.

2. Domestic Economic Challenges

• High Inflation and Debt: Ghana’s inflation rate reached 20.9% in 2024, though it’s projected to fall to 11.1% in 2025. A high debt burden, which led to an IMF bailout in 2022, limited fiscal flexibility and foreign exchange access, weakening the cedi.

• Low Foreign Reserves: Historically, Ghana’s low reserves have made it vulnerable to currency shocks. However, reserves have recently improved to $9 billion, providing a buffer to stabilize the cedi.

• Economic Fundamentals: Persistent fiscal deficits and external imbalances have long pressured the cedi. Yet, GDP growth projections (3.4% in 2024, rising to 4.3% in 2025) signal improving fundamentals that could support further recovery.

3. Bank of Ghana Interventions

The Bank of Ghana has played a critical role in stabilizing the cedi, injecting $490 million into the forex market in recent months. These efforts, combined with strong offshore inflows, have driven the cedi’s rally in May 2025. Traders expect this momentum to continue, provided reserves remain robust and global conditions stabilize.

Bawumia’s Gold Buying Plan: A Game-Changer?

In August 2024, Vice President Mahamudu Bawumia announced an ambitious plan to anchor the cedi to gold, aiming to enhance exchange rate stability. This builds on the success of the Domestic Gold Purchase Program (DGPP), through which the Bank of Ghana buys locally produced gold with cedis, boosting foreign exchange reserves by $5 billion in recent years. The inauguration of the Royal Ghana Gold Refinery in 2024 further supports this strategy by enabling Ghana to refine and add value to its gold exports.

How It Works

• Gold for Oil Program: This initiative allows Ghana to barter gold for oil imports, reducing dollar demand and easing pressure on the cedi. By May 2025, this program has contributed to stabilizing the exchange rate.

• Gold Reserves: Bawumia highlighted Ghana’s untapped gold reserves, estimated at 5 billion ounces, as a foundation for long-term currency stability. By increasing gold purchases, the Bank of Ghana strengthens its reserves, providing a hedge against dollar shortages.

• Potential Impact: While the gold buying plan has bolstered reserves and supported the cedi’s recent gains, its long-term success depends on sustained gold production, global gold prices, and effective implementation. Critics argue that over-reliance on gold could expose Ghana to commodity price volatility, but early results are promising.

Trump’s Policies: Any Connection?

President Donald Trump’s return to office in January 2025 has sparked speculation about its impact on global currencies, including the cedi. His proposed tariff policies, aimed at boosting US manufacturing, could weaken the US dollar by disrupting global trade flows. A weaker dollar benefits emerging market currencies like the cedi, as it reduces the cost of dollar-denominated imports and eases debt repayment pressures.

However, the direct impact of Trump’s policies on the cedi remains limited. Ghana’s currency performance is more closely tied to domestic policies, commodity prices, and IMF-backed reforms. While a weaker dollar may have contributed to the cedi’s recent rally, it’s not the primary driver.

What Ghanaians Should Know

1. Stay Informed on Exchange Rates: The cedi’s volatility affects the cost of imported goods like fuel, electronics, and food. Monitor exchange rate trends to plan purchases and budgeting.

2. Support Local Products: Reducing reliance on imports by buying locally produced goods can ease pressure on the cedi and support Ghanaian businesses.

3. Understand Gold’s Role: Bawumia’s gold buying plan is a long-term strategy to stabilize the cedi. While it’s showing early promise, its success depends on global market conditions and effective policy execution.

4. Economic Outlook: With inflation projected to decline and GDP growth improving, Ghana’s economy is on a recovery path. However, external shocks like global recessions or commodity price swings could disrupt progress.

5. Forex Access: Businesses and individuals needing dollars should work with authorized forex bureaus and banks to avoid black-market rates, which can be exploitative during volatile periods.

Looking Ahead

The cedi’s journey from 2024 to May 2025 reflects Ghana’s broader economic challenges and resilience. While global factors like commodity prices and US policies play a role, domestic efforts—such as the Bank of Ghana’s interventions and Bawumia’s gold buying plan—are critical to stabilizing the currency. For Ghanaians, staying informed and supporting local initiatives can help mitigate the impact of currency fluctuations.

As the cedi continues its recovery, sustained reforms, prudent fiscal management, and strategic use of Ghana’s natural resources will be key to ensuring long-term stability. Whether the cedi can maintain its upward trajectory in 2025 depends on balancing these complex factors in an ever-changing global landscape.