BoG Responds Confidently After Cedi Appreciates by 12%

The First Deputy Governor of the Bank of Ghana, Dr. Zakaria Mumuni, has responded robustly to critics of the central bank’s recent monetary policies after the Ghanaian cedi appreciated by an impressive 12.2% year-to-date. This remarkable turnaround has been seen as a significant achievement, considering the cedi’s 13% depreciation at the same time last year.

Dr. Mumuni discussed the cedi’s strong performance during an appearance on the PM Express Business Edition, emphasizing that the appreciation marks a historic shift since the Bank of Ghana adopted a flexible exchange rate system. “We’ve seen the cedi appreciating by over 12%—specifically 12.2%—this year,” he said. “By comparison, the cedi had depreciated by about 13% at this point last year, which highlights a complete reversal of the situation.”

The central bank official described the cedi’s current strength as “maybe unprecedented,” noting that it reflects the effectiveness of a comprehensive mix of policies rolled out by the Bank of Ghana. He explained that the cedi’s performance is not a product of external factors, but rather the result of an intentional, domestic policy framework designed to stabilize the currency and control inflation.

According to Dr. Mumuni, this performance represents the first time in the history of the flexible exchange rate system that the cedi has shown such resilience within the first four to five months of the year. “When you look at the data since the adoption of the floating exchange rate regime, this is the only time we’ve seen this level of strength early in the year,” he said.

One of the key elements of the central bank’s strategy was a series of bold domestic policy decisions, including a hike in interest rates and a tightening of monetary policy. These moves initially faced strong criticism from various sectors, particularly from business groups like the Ghana Union of Traders Association (GUTA) and financial analysts. Many questioned the wisdom of such measures, fearing they could exacerbate the country’s economic challenges.

Despite the backlash, Dr. Mumuni defended the Bank of Ghana’s actions, stating that the decisions were well-calculated and necessary for long-term stability. “When we raised the policy rate, a lot of people, including GUTA, came after us. Analysts were not happy,” he recalled. “But we knew exactly what we were doing, and the results are beginning to speak for themselves.”

Dr. Mumuni underscored that the cedi’s improvement is largely a result of the central bank’s rigorous liquidity management policies. By tightening the money supply through various measures, including open market operations and raising the cash reserve ratio, the Bank of Ghana has been able to control excess liquidity in the system, which is crucial for containing inflation and stabilizing the currency.

“We tightened monetary policy to reengineer the disinflation process,” Dr. Mumuni explained. “This is really helping, and we are doing it through our open market operations, which has successfully reduced excess liquidity.” He also highlighted that the earlier increase in the cash reserve ratio played a vital role in sterilizing cedi liquidity, further supporting the disinflation process.

The First Deputy Governor also highlighted that the results reflect the careful balance of policies designed not only to address inflation but also to restore confidence in Ghana’s economic management. He expressed belief that the strong performance of the cedi is proof that the Bank of Ghana’s strategy is starting to yield significant, positive outcomes.

Dr. Mumuni’s statements reflect growing confidence within the central bank that its monetary discipline is now having the desired effect, despite initial skepticism. He argued that the cedi’s recent appreciation, along with ongoing improvements in liquidity management and inflation control, is a testament to the effectiveness of policy reforms.

For Dr. Mumuni, the turnaround of the cedi is not just a reflection of economic fundamentals, but a sign that Ghana’s macroeconomic framework is becoming more credible. The central bank’s actions, he argued, are beginning to restore stability to the country’s currency, suggesting that, with continued policy discipline, further gains can be expected in the future.

As the Bank of Ghana’s policies continue to unfold, Dr. Mumuni’s remarks signal that the country may be on the path to sustained economic stability, with a stronger, more resilient cedi leading the way.