Ghana's cedis holds strong, outpacing the U.S. dollar in stability and gains

Bloomberg data showed that the cedi surpassed its emerging market peers, becoming the best-performing African currency in the world in early June. The rally reduced foreign debt costs, cutting nearly 150 billion cedis over five months.

This cedi's impressive performance at the midyear point of the year marks a significant recovery, especially considering that the currency lost 55% of its value in 2022 due to inflation and sovereign debt issues. Ghana, which recently announced a $1 billion deal with the UAE to establish Africa's largest AI and technology innovation hub, welcomes this remarkable recovery as a positive economic trajectory. The Bank of Ghana noted that the improvement resulted from the country experiencing consistency in foreign exchange inflows. Other factors include the government's consolidation of fiscal measures, such as reducing public spending. The government also suspended new projects and froze the clearance of arrears. All these measures were deemed instrumental in helping to relieve pressure on the country's currency.

Ghanaian President John Mahama believes that if debt continues to trend upward, the country could reach its 2028 debt sustainability target of 55-58% by the end of this year.

What does the future hold?

A stronger cedi will inevitably lead to cheaper imports, which could help bring down inflation. Investors are also continuing to express interest in Ghana's financial infrastructure. Many have responded positively to the performance of gold and oil exports and the International Monetary Fund's ongoing support. These positive developments are also expected to open many doors for real estate investors.

Economists have warned, however, that the strength of Ghana's currency could make exports a bit more expensive for buyers outside the country, which could impact competitiveness. Experts caution the country to remain focused on managing its finances and diversifying its economic activities to sustain this positive trend.

Ghana's performance highlights the resilience of its currency and improved policy credibility. The country has reclaimed a position within the international financial markets, signaling potential stability after navigating post-crisis recovery paths.