Cedi to Remain Strong in Q2, Bolstered by IMF Assistance to FX Reserves

Ghana’s national currency, the cedi, is expected to hold its recent gains and remain resilient through the second quarter of 2025. This positive projection comes from Databank Research, which attributes the optimistic outlook to a combination of robust foreign exchange (FX) interventions by the Bank of Ghana (BoG), anticipated inflows from the International Monetary Fund (IMF), and an improving macroeconomic environment.

According to the latest economic briefing by Databank, the cedi’s stability will be primarily supported by consistent efforts from the central bank to manage FX market dynamics. These include strategic interventions to supply foreign currency, manage liquidity, and stabilize exchange rate expectations. Databank believes these measures are crucial to mitigating short-term volatility and building sustained investor confidence.

Central Bank Interventions Anchor Stability

Databank notes that the BoG’s proactive approach in the foreign exchange market is essential to maintaining equilibrium. Through calibrated interventions, the central bank is ensuring that supply imbalances are addressed while keeping speculative pressures in check.

“The Bank of Ghana’s targeted actions in the FX market will continue to provide liquidity and temper excessive fluctuations in the exchange rate,” the report emphasized. This strategy, it adds, is expected to contribute significantly to restoring market confidence in the local currency.

Weaker Dollar Outlook Favors Emerging Markets

Another factor working in the cedi’s favor is the declining strength of the U.S. dollar. As global investors grow more cautious about the U.S. economic outlook—amid fiscal policy uncertainties, inflation concerns, and renewed trade tensions—the demand for dollar-denominated assets has softened.

Databank suggests that this global shift is creating a tailwind for emerging and frontier market currencies, including those in Sub-Saharan Africa (SSA). With reduced external pressure from a stronger dollar, currencies like the cedi are expected to benefit from improved relative demand.

Enhanced Economic Sentiment Limits Speculation

The report also highlights improved market sentiment around Ghana’s economic trajectory. With signs of fiscal consolidation, monetary discipline, and reforms taking root, there has been a notable reduction in speculative trading against the cedi. Databank points out that fears of sharp depreciation are easing as investors gain more trust in Ghana’s economic policies and long-term outlook.

Lower levels of capital flight and reduced panic in currency markets have created a more stable environment. “This improved sentiment is likely to discourage speculative positioning and support a stronger and more stable currency outlook in the near term,” the report said.

IMF Funding to Reinforce FX Resilience

In addition to domestic and external factors, upcoming support from the International Monetary Fund is poised to further fortify Ghana’s foreign currency reserves. Ghana recently reached a staff-level agreement with the IMF as part of the fourth review under its $3 billion Extended Credit Facility (ECF). Upon approval by the IMF Executive Board, the country is expected to receive a fresh disbursement of $370 million.

Databank believes this tranche will significantly bolster Ghana’s FX reserves, enabling the central bank to continue defending the cedi against external shocks.

“These funds will not only enhance the country’s external buffers but also enable critical supply-side interventions needed to stabilize the currency,” the report said.

Cedi Shows Strong Performance in Q2

The Ghanaian cedi has posted impressive gains over the past several weeks, reversing much of the depreciation experienced earlier in the year. As of mid-May 2025, the currency is trading at approximately GH¢12.90 to the US dollar in the retail market, reflecting rising confidence and effective policy coordination.

With macroeconomic fundamentals improving, strong external support on the horizon, and central bank vigilance in full effect, the outlook for the cedi remains stable. Analysts at Databank expect that, barring major global shocks, the cedi will maintain its current trajectory throughout the second quarter of the year.