In early June 2025, Ghanaian Cedi emerged as Africa’s best-performing currency, gaining optimism from the financial market and setting a positive tone for the country’s economic recovery. However, this success proved short-lived, as the cedi faced a dramatic reversal fueled by a severe dollar shortage and increasing demand for U.S. dollars.
With a lack of physical dollar liquidity in banks and heightened import activity, the Ghanaian foreign exchange market finds itself under immense strain. This development threatens to undo the progress made in reducing inflation and stabilizing the economy in recent months.
Forex Challenges and the Impact of Inflation
The Bank of Ghana (BoG) has been instrumental in intervening to stabilize the cedi, employing measures such as dollar sales and forward auction interventions. These efforts initially appeared to bear fruit, with Ghana’s inflation rate declining to a three-year low of 18.4% in May 2025, down from 21.2% in April. The reduced cost of imports and the strengthening cedi were pivotal in achieving this milestone.
However, the recent dollar shortage has significantly altered the narrative. Financial institutions, particularly in Accra and other major cities, have struggled to meet customer demands for dollar withdrawals. Delayed inflows from exports, declining remittances, and surging import demands have exacerbated the situation, creating instability in the forex market.
Parallel Market and Rising Speculation
The acute dollar shortage has widened the gap between official exchange rates and those on the parallel market. Currency traders have reported a spike in speculative activity, driven by customers’ inability to access dollars through official channels. Many Ghanaians seeking dollars for business transactions or travel have been turned away or placed on indefinite waiting lists.
This gap has shaken confidence in the cedi’s stability, with analysts warning that prolonged instability could fuel inflation, increase black market activity, and further delay Ghana’s post-IMF recovery.
Read: New Budget Sparks Concerns Over Funding Deficit in Healthcare and Education
IMF Disbursement Offers Hope
A beacon of hope lies in the anticipated inflow of fresh dollar reserves. The International Monetary Fund (IMF), under its $3 billion Extended Credit Facility (ECF) program, approved a $360 million disbursement to Ghana in December 2024. The upcoming tranche of this facility is expected to bolster dollar liquidity, stabilize the cedi, and provide temporary relief to the embattled forex market.
Cedirates, an online currency monitoring platform, reported that Ghana could receive additional physical dollars next week. Such an inflow is critical for restoring balance to the forex market and alleviating the dollar scarcity.
Addressing Root Causes and Long-Term Solutions
For the Bank of Ghana, the immediate challenge lies in mitigating the short-term volatility in the forex market. Analysts suggest that the BoG might need to expedite disbursements, enhance regulatory oversight, and maintain open communication with key stakeholders to restore confidence in the cedi.
Additionally, addressing structural challenges is paramount. Export revenues must be boosted through policies that support local industries and trade. Incentivizing remittances and minimizing reliance on imports can also play a vital role in stabilizing the forex market in the long run.
Conclusion
Ghanaian Cedi stands at a critical juncture. While the currency’s performance earlier in 2025 signaled hope for economic recovery, the recent setbacks highlight the fragility of its progress. As the Bank of Ghana and government agencies work to stabilize the forex market, the success of these measures will determine the cedi’s resilience in the face of mounting challenges.
The path ahead requires a mix of strategic interventions, effective monetary policies, and long-term structural reforms to safeguard Ghana’s economic future.
Ghanaian Cedi Performance and Current Challenges
1. Why has the Ghanaian cedi lost its gains in 2025?
The cedi has faced setbacks due to a severe shortage of physical U.S. dollars in local banks, rising import demands, delayed export inflows, and declining remittances. These factors have strained the forex market, erasing earlier gains.
2. What was the cedi’s performance earlier in 2025?
In early June 2025, the Ghanaian cedi briefly became Africa’s best-performing currency due to central bank interventions and reduced import costs. This performance was supported by a three-year low inflation rate of 18.4% in May.
3. How has the dollar shortage affected Ghanaians?
The shortage has made it difficult for businesses and individuals to access U.S. dollars for transactions or travel. Many customers have been turned away from banks or placed on waiting lists, fueling speculation and widening the gap between official and parallel market rates.
4. What measures has the Bank of Ghana taken to stabilize the cedi?
The Bank of Ghana has implemented several interventions, including dollar sales, forward auction interventions, and regulatory measures. These actions initially helped stabilize the cedi but face renewed pressure due to ongoing forex challenges.
5. What role does the IMF play in addressing Ghana’s forex issues?
The IMF approved a $360 million disbursement to Ghana under its $3 billion Extended Credit Facility (ECF) program. An upcoming tranche of funds is expected to enhance dollar liquidity and stabilize the forex market in the short term
6. What are the potential risks if the dollar shortage persists?
Prolonged dollar scarcity could lead to increased inflation, greater reliance on black market forex activity, and delayed economic recovery under Ghana’s IMF program
7. What can be done to improve Ghana’s forex stability in the long run?
Long-term solutions include boosting export revenues, incentivizing remittances, reducing reliance on imports, and implementing structural reforms to support local industries. Enhanced regulatory oversight and targeted monetary policies are also critical.
8. Will the cedi recover soon?
The cedi’s recovery depends on the effective implementation of central bank interventions, timely dollar inflows, and structural economic improvements. The anticipated IMF disbursement offers short-term hope, but sustained recovery requires addressing root causes of forex instability.
9. What is the impact of the parallel market on the cedi?
The parallel market widens the gap between official and unofficial exchange rates, undermining confidence in the cedi. It also creates opportunities for speculation, further destabilizing the forex market.
10. How can businesses in Ghana adapt to the current forex challenges?
Businesses can manage forex risks by diversifying revenue streams, sourcing locally when possible, and utilizing forward contracts to hedge against currency fluctuations. Engaging financial advisors to navigate volatile market conditions is also recommended.
