The recent surge in the value of the Ghanaian cedi against major international currencies, while lauded as a sign of improving macroeconomic stability, has presented an unforeseen challenge: a significant decline in remittance inflows. Ghanaians living abroad, a crucial source of external funding for the country, have reportedly reduced the amount of money they send home due to the cedi’s appreciation. This unexpected consequence underscores the complex interplay between currency fluctuations and economic behavior, highlighting the need for policymakers to consider the broader implications of economic shifts. The Bank of Ghana Governor, Dr. Johnson Asiama, revealed a near 50% drop in remittances, attributing this decline to a change in the diaspora’s perception of the cedi’s strength. Many now believe that their money will have less purchasing power in Ghana, particularly for projects like construction and real estate, thus delaying or halting their investments.
The cedi’s remarkable recovery in 2025, appreciating by over 40% against the US dollar, 31% against the British pound, and 24% against the Euro, is largely attributed to positive macroeconomic indicators. Falling inflation, renewed investor confidence, and a bolstering of foreign exchange reserves have all contributed to this impressive performance. These factors typically signal a healthy economy and attract foreign investment. However, in this instance, the cedi’s rapid appreciation has created a paradoxical situation where a positive economic indicator has negatively impacted a vital source of income for the country. This unexpected outcome underscores the importance of considering the behavioral responses of various economic actors when evaluating macroeconomic trends and implementing policy adjustments.
Dr. Asiama’s observations highlight a crucial dilemma for the Bank of Ghana: how to maintain the positive momentum of the cedi’s recovery without discouraging remittance flows. While the strengthening currency offers benefits such as lower import costs and reduced inflationary pressures, the significant drop in remittances poses a threat to the overall economic picture. Remittances play a crucial role in supporting household incomes, financing development projects, and contributing to the country’s foreign exchange reserves. The challenge, therefore, lies in striking a balance between fostering macroeconomic stability and ensuring that vital income streams like remittances remain robust. This requires not only sound economic policy but also effective communication strategies to address the concerns of the diaspora and maintain their confidence in the Ghanaian economy.
A key argument presented by Dr. Asiama is that the falling inflation in Ghana should offset the impact of the cedi’s appreciation on project costs. He points out that the prices of building materials, like cement, should decrease in line with the declining inflation, thereby negating the perceived loss in purchasing power due to the stronger cedi. This argument suggests that the diaspora’s concerns might stem from a lack of awareness about the broader economic context and the interconnectedness of inflation and currency appreciation. Therefore, a targeted communication strategy is needed to clarify this relationship and reassure Ghanaians abroad that their investments will still yield reasonable returns despite the cedi’s strength.
To address this challenge, the Bank of Ghana is considering a proactive approach: a public engagement campaign targeting Ghanaians living in major remittance-sending countries. This campaign aims to educate the diaspora about the current economic landscape in Ghana, emphasizing the continued value of their investments despite the cedi’s appreciation. By directly engaging with the diaspora, the central bank hopes to restore confidence and encourage continued remittance flows. This outreach effort underscores the importance of clear and effective communication in managing expectations and influencing economic behavior. The success of this campaign will depend on the clarity of the message, the reach of the communication channels, and the credibility of the information presented.
The situation with the cedi’s appreciation and its impact on remittances underscores the complexity of managing a national economy. While strengthening the currency is generally seen as a positive development, it can have unintended consequences that require careful consideration and proactive intervention. The Bank of Ghana’s proposed public engagement campaign reflects an understanding of this complexity and a commitment to addressing the concerns of the diaspora. By proactively engaging with Ghanaians abroad and providing clear and accurate information about the Ghanaian economy, the central bank aims to maintain this vital source of income while continuing to pursue policies that promote macroeconomic stability. This situation serves as a valuable lesson in the importance of considering the behavioral responses of different economic actors when formulating and implementing economic policies.
