Ghana’s Cedi Surge Raises Questions Over Remittance Flows and Policy Sustainability

 Ghana’s currency has staged one of its sharpest rallies in recent memory, strengthening from GHS 16.00 per US dollar in January to GHS 10.50 in early August on the official market. The appreciation — a gain of over 34 per cent in nominal terms — means it now takes significantly fewer Cedis to purchase the same amount of foreign currency.               

The Bank of Ghana (BoG) attributes the movement partly to deliberate monetary policy actions, including tight interest rate settings, targeted foreign exchange interventions, and efforts to restore market confidence. Yet, the parallel market rate continues to trade at roughly 20 per cent weaker than the official rate — about GHS 12.60 per USD — suggesting persistent demand–supply imbalances outside formal channels.

Understanding Appreciation: Correcting the Misinterpretations

Some local commentary has mischaracterised the Cedi’s strengthening, treating it as a sign of weaker returns for exporters and remittance receivers. In reality, currency appreciation means each US dollar exchanged now yields fewer Cedis than before.            
- January 2025: USD 1,000 at GHS 16.00/USD = GHS 16,000    
- August 2025: USD 1,000 at GHS 10.50/USD = GHS 10,500 (official rate)         

This arithmetic is straightforward, but the behavioural economics are more complex. While the purchasing power of the Cedi has improved for importers and those buying foreign goods or services, recipients of USD remittances may feel they are getting “less” in local terms, even if their foreign income remains constant.

Remittance Elasticity: Can Appreciation Cause a 50% Drop?

The Governor of the BoG, recently noted that some remittance flows “have suddenly stopped,” estimating a 50 per cent decline. Economists caution, however, that exchange rate shifts alone rarely drive such large swings in remittances:     
- Empirical evidence from the World Bank shows that remittances tend to be price inelastic; they respond more to migrants’ income levels and family obligations than to currency fluctuations.
- Large, rapid appreciations can affect timing of transfers — migrants may delay sending funds in expectation of a reversal — but typically do not halve annual volumes.

Other possible contributors to the drop could include global employment trends, reduced project financing needs in Ghana, or greater reliance on informal transfer channels given the parallel market premium.

Policy and Market Dynamics

From a monetary policy perspective, a strong currency can help curb imported inflation, improve debt service costs in foreign currency, and bolster investor confidence. However, if the appreciation is not underpinned by productivity gains, export competitiveness can suffer, potentially eroding trade balances over time. 

The persistence of a 20% parallel market gap suggests that official reserves and BoG interventions, while effective in the short term, may need to be complemented by structural reforms to deepen FX liquidity and restore convergence between the two markets.

Visual Analysis: How the Math Plays Out

Scenario	Jan 2025 (Official)	Aug 2025 (Official)	Jan 2025 (Parallel)	Aug 2025 (Parallel)
Fixed USD remittance (USD 1,000)	GHS 16,000	GHS 10,500	GHS 19,200	GHS 12,600
Fixed GHS target (GHS 16,000)	USD 1,000	USD 1,524	USD 833	USD 1,270
Actual flows (est.)	$200m	$100m	$200m	$100m

 

 

The Outlook

Whether the Cedi’s current strength is sustainable will depend on the BoG’s ability to maintain policy credibility while balancing growth and inflation objectives. The durability of remittance flows — a critical foreign exchange source — will hinge more on economic conditions in the diaspora than on short-term rate movements.

As Ghana’s currency story unfolds, the challenge for policymakers will be ensuring that the benefits of appreciation are not outweighed by the unintended consequences for households and businesses relying on foreign earnings.

Accra, 8 August 2025