Collins Sefa The Bank of Ghana (BoG) is stepping back from its active role in Ghana’s foreign exchange market as the local currency gains strength and international reserves rebound faster than anticipated.
This shift marks a critical transition toward a more market-led exchange rate regime.
Cedi Gains Momentum Amid Rising Reserves
So far in 2025, the Ghanaian cedi has staged a remarkable recovery, appreciating more than 31% against the US dollar and registering significant gains against other major currencies. The currency’s strength is largely supported by a surge in foreign inflows, a solid increase in reserves—now at $10.7 billion—and improved macroeconomic stability.
This performance reflects a broader recovery in confidence, driven by:
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Higher cocoa and gold receipts
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A tight monetary policy stance
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Improved investor sentiment
BoG Embraces Auction-Only FX Sales
In a notable policy update, the Bank of Ghana has eliminated all bilateral foreign exchange deals, moving entirely to a rules-based auction system. This transition removes discretionary pricing from the central bank’s toolbox and aims to foster transparency and predictability in the FX market.
BoG has also suspended its sell-buyback and swap arrangements, reinforcing its commitment to a non-interventionist approach that allows market forces to determine exchange rates.
“All FX interventions are now conducted through auction windows. The use of discretionary transactions has been fully phased out,” the Bank stated.
New FX Framework Set for September Rollout
To anchor its evolving policy stance, the BoG is finalizing a comprehensive Foreign Exchange Intervention Policy Framework, expected to be implemented by September 2025. The framework will clearly define:
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The scope and tools for FX operations
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Governance structures and decision-making protocols
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Transparency standards and accountability measures
This structured approach is expected to enhance market confidence and reduce speculation, paving the way for a modernized FX ecosystem.
IMF Endorses Market Reforms
The International Monetary Fund (IMF), in its latest programme review, commended the BoG for replacing opaque bilateral arrangements with auction-based mechanisms. According to the IMF, this reform enhances transparency and aligns with best practices in foreign exchange management.
The Fund also supported Ghana’s recent move to eliminate multiple currency practices and backed the adoption of a new FX reference rate methodology introduced last year.
Caution Over Gold-Based Reserve Strategy
While the BoG’s Domestic Gold Purchase Programme (DGPP) has contributed significantly to the reserve build-up, the IMF cautioned that such operations must remain commercially driven. It flagged potential risks including:
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Price volatility in the gold market
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Liquidity mismatches
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Challenges to policy credibility
Maintaining market-based pricing and prudent governance around the programme will be key to its sustainability.
Tight Monetary Policy Still in Place
Inflation remains above the BoG’s medium-term target range of 8% ±2%, largely due to rising non-food prices. In response, the Bank increased its benchmark policy rate to 28% earlier this year, signaling its intent to maintain a tight stance until inflationary pressures ease.
A Freer FX Market on the Horizon
The BoG’s ongoing reforms suggest a deliberate move toward a freer and more competitive foreign exchange market. With the cedi stabilizing, reserves improving, and investor sentiment recovering, Ghana appears poised to adopt a more sustainable FX regime—one that is less dependent on central bank interventions and more reflective of true market demand and supply dynamics.
As the BoG prepares to release its updated FX playbook in September, market participants are watching closely. The next phase could define a new era of currency policy—anchored in transparency, credibility, and flexibility.
