Cedi's Strong Performance: Expert Explains Why Ghana's Currency is Thriving

2025-05-24
Cedi's Strong Performance: Expert Explains Why Ghana's Currency is Thriving
3News

Ghana's currency, the cedi, has been enjoying a period of relative strength against major foreign currencies, particularly the US dollar. But what's driving this positive trend? Professor Godfred Bokpin, a respected lecturer at the University of Ghana Business School, sheds light on the factors contributing to the cedi's appreciation during a recent discussion on TV3's current affairs program.

Understanding the Recent Shift

For months, the cedi faced significant pressure, struggling against the dollar and other global currencies. However, recent weeks have seen a noticeable turnaround. Professor Bokpin attributes this improvement to a combination of factors, moving beyond the simple narrative of currency fluctuations.

Key Drivers of the Cedi's Strength

Several elements have converged to bolster the cedi’s performance:

  • Increased Foreign Exchange Inflows: Professor Bokpin highlighted the positive impact of increased foreign exchange inflows, particularly from remittances. Ghanaians working abroad sending money home is a crucial source of foreign currency, directly supporting the cedi's value.
  • Cocoa Processing Boom: Ghana's cocoa sector is experiencing a surge in processing activities. This means more value is being added locally, leading to higher export earnings in US dollars, which subsequently strengthens the cedi. This is a significant and often overlooked driver.
  • Government Policies: While not specifying particular policies, Professor Bokpin acknowledged that government measures aimed at stabilizing the economy and managing foreign exchange reserves have played a role. Fiscal discipline and prudent monetary policy are essential for currency stability.
  • Investor Confidence: A gradual improvement in investor confidence in the Ghanaian economy is contributing to increased investment and capital inflows. This is a long-term indicator of economic health.

Beyond the Headlines: A Sustainable Trend?

While the cedi's recent performance is encouraging, Professor Bokpin cautioned against complacency. He emphasized that sustained strength requires ongoing commitment to sound economic management and structural reforms. The global economic landscape remains volatile, and Ghana is not immune to external shocks.

Looking Ahead

The expert stressed the importance of diversifying Ghana’s export base to reduce reliance on a few commodities. Furthermore, continued efforts to attract foreign direct investment and improve the business environment are crucial for long-term economic stability and a robust cedi.

The cedi's recent gains offer a welcome respite after a challenging period. By understanding the underlying factors driving this performance, Ghanaians can better appreciate the progress being made and the ongoing work needed to ensure a stable and thriving economy.

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