The recent appreciation of the Ghanaian cedi against the US dollar has sparked optimism in Ghana’s economic circles. Economist Dr. Thomas Appiah attributes this positive trend to a confluence of factors, primarily the ongoing global economic tensions, particularly the tariff war initiated by the United States under the then-administration. This trade war, characterized by escalating trade barriers, has exerted downward pressure on the US dollar, indirectly contributing to the cedi’s recent gains. This external factor, combined with internal economic strategies, has created a favorable environment for the cedi’s resurgence. The Bank of Ghana’s report on May 5, 2025, indicated a significant strengthening of the cedi against the dollar, further reinforcing this positive trajectory.
Dr. Appiah emphasizes the role of Ghana’s robust gross international reserves, estimated at $9 billion, as a crucial buffer supporting the cedi’s stability. This reserve acts as a financial cushion, enabling the central bank to intervene in the foreign exchange market and mitigate any undue volatility. Furthermore, he highlights the devaluation of the US dollar on the international market, a phenomenon he links to the trade policies implemented during that period. The resulting weakening of the dollar has created a relative strengthening of other currencies, including the Ghanaian cedi.
Beyond external factors, Dr. Appiah acknowledges the positive impact of renewed investor confidence in the Ghanaian economy, fueled by the government’s fiscal discipline and strategic economic initiatives. These policies have fostered a more stable and predictable economic environment, attracting investment and bolstering market sentiment. This renewed confidence is a critical driver of the cedi’s stability, reflecting a belief in the long-term health and resilience of the Ghanaian economy. The combination of external pressures on the dollar and internal economic improvements has created a synergistic effect, propelling the cedi’s remarkable recovery.
The strengthening of the cedi has begun to manifest in tangible benefits for the Ghanaian populace, particularly in the form of decreasing fuel prices. While acknowledging the global decline in petroleum prices, Dr. Appiah emphasizes the direct link between the cedi’s appreciation and the reduction in local fuel costs. This positive development offers immediate relief to consumers and businesses alike, reducing transportation costs and easing inflationary pressures. However, the impact on general goods prices has been less immediate, highlighting the complex interplay of factors influencing retail pricing.
While the cedi’s gains are evident at the fuel pumps, their impact on general goods prices has been more nuanced. Dr. Appiah explains that the transmission of currency fluctuations to retail prices typically involves a time lag, often taking up to three months for the full effects to be felt. This delay reflects the complexities of supply chains, inventory management, and pricing strategies within the retail sector. He urges patience, emphasizing that the benefits of the stronger cedi will eventually trickle down to consumers, leading to lower prices for everyday goods and services.
The situation with transport fares further illustrates this lagged effect. Despite the decrease in fuel prices, transport operators, particularly the Ghana Private Road and Transport Union (GPRTU), have been hesitant to reduce fares. They cite the persistently high cost of spare parts as a significant countervailing factor, arguing that a fare reduction would be premature given these ongoing operational expenses. This situation highlights the complex dynamics of price adjustments in an economy and the need for a holistic view when assessing the impact of currency fluctuations. As global economic conditions continue to evolve and domestic policies take hold, Ghanaians remain cautiously optimistic that the cedi’s recovery will ultimately translate into broader economic relief, impacting not only fuel prices but also the cost of essential goods and services, improving the overall standard of living.
