Dollar suffers significant decrease as Turkish lira surges by 63% in unexpected reversal against it
Taking a breather, businesses and households in Ghana can finally let out a collective sigh of relief, as the local currency, the cedi, has experienced an impressive recovery against the US dollar come mid-December, marking a 63.7% appreciation.
This dramatic shift has come as quite a surprise, considering that just a matter of weeks earlier, the cedi was on the receiving end of a battering in the foreign exchange market, suffering a year-to-date depreciation of a substantial 54.2% at the end of November, selling as low as GH¢15 to US$1.
Data from the Bank of Ghana reveals that as of December 15, 2022, the cedi managed to wrestle the US dollar, thereby reducing the year-to-date depreciation to a more manageable 24.9%. This is all great news, as it's eased the crushing burden on consumer goods that had seen prices quadruple over the past two months due to exchange rate pressure. For instance, diesel prices at the pumps, which had shot up to more than GH¢23 in early November, have now dropped to around GH¢16.
Given Ghana's heavy reliance on imports, especially food products, the cedi's stability has also led to prices stabilizing, even if reductions haven't yet been seen.
So, what's behind this sudden cedi comeback? According to the Bank of Ghana, the rapid depreciation in the exchange rate was largely fueled by speculation, particularly when it became apparent that the government was planning on embarking on debt restructuring, leading to portfolio rebalancing in favor of foreign currency holdings rather than Ghana cedi-denominated assets.
To counter this, the central bank imposed directives aimed at putting an end to speculative behavior. Banks and forex bureaus were instructed to trade foreign currency only to those who genuinely need it for transactions and require proof of their need for foreign currency. The Bank also launched an aggressive crackdown on illegal forex operators, popularly known as 'the black market', arresting over 70 of them in September. This move made it abundantly clear to the public that the central bank was on high alert for these illegitimate operators.
Governor Dr. Ernest Addison explained that this was necessary, as the black market had a significant influence on determining exchange rates on the forex market. His goal was to restore order in the forex market by ensuring the interbank market took the reins to enforce regulations on forex trading, thereby streamlining the supply of foreign currency in the country.
As for the cedi's long-term prospects, only time will tell. However, in the meantime, Ghana's currency's outstanding recovery has brought considerable relief to both businesses and households.
While the specifics of the late 2022 policies remain unclear at this moment, additional historical data and specific Bank of Ghana announcements from that period could provide valuable insights. As it stands, recent policies and interventions in 2025 have contributed to the cedi's stability, including monetary policy adjustments, foreign exchange interventions, targeted foreign exchange reforms, and enhanced market surveillance.
The Bank of Ghana's interventions, such as imposing directives on banks and forex bureaus to curb speculative behavior and cracking down on illegal forex operators, have likely played a significant role in the cedi's impressive recovery against the US dollar. The stabilization of the cedi has brought relief to both businesses and households in Ghana, as it has eased the burden on consumer goods and led to prices stabilizing, even if reductions haven't yet been seen. In the realm of finance and business, this consolidated market recovery could be the foundation for future strategic trade decisions and potential business opportunities.
