FridayOL

Ghana's currency, the cedi, has been showing surprising resilience against major global currencies, particularly the US dollar. But what's driving this positive performance? Professor Godfred Bokpin, a respected lecturer at the University of Ghana Business School, provides valuable insights into the factors contributing to the cedi's recent strength.

Speaking on TV3's current affairs program, Professor Bokpin laid out a compelling case. He highlighted several key elements working in the cedi's favour. Firstly, he pointed to the impact of recent policy adjustments by the Bank of Ghana. These interventions, aimed at stabilizing the economy and curbing inflation, appear to be having a positive effect on investor confidence.

“The Bank of Ghana’s tightening of monetary policy, including interest rate hikes and foreign exchange interventions, has played a crucial role,” Professor Bokpin explained. “This has helped to manage inflation expectations and stabilize the exchange rate.”

Beyond monetary policy, the lecturer also emphasized the importance of improved fiscal discipline. Government efforts to reduce spending and increase revenue collection are contributing to a more sustainable economic outlook, which, in turn, bolsters the cedi.

External Factors Also at Play

Professor Bokpin didn't ignore the influence of external factors. He noted that global commodity prices, particularly for gold (a significant export for Ghana), have been generally supportive. Additionally, a slight easing of pressure on the US dollar, after a period of aggressive strengthening, has also provided some relief for emerging market currencies like the cedi.

“While the global economic outlook remains uncertain, the combination of domestic policy improvements and favourable external conditions has created a window of opportunity for the cedi to appreciate,” he stated.

Looking Ahead: Sustainability is Key

However, Professor Bokpin cautioned against complacency. He stressed that the cedi's current strength is not guaranteed to last. Maintaining this positive trend requires continued commitment to sound economic policies and prudent financial management.

“Sustaining this momentum will depend on the government’s ability to maintain fiscal discipline, address structural challenges in the economy, and attract foreign investment,” he concluded. “It’s crucial to focus on long-term economic reforms rather than relying solely on short-term fixes.”

The insights offered by Professor Bokpin provide a valuable perspective on the cedi’s performance and the factors that will shape its future trajectory. As Ghana navigates a complex global economic landscape, these observations underscore the importance of consistent and well-considered policy choices.