Cedi Depreciates by 2% in Early 2025 Amid Economic Pressures

The Ghanaian cedi has begun 2025 with a notable depreciation, weakening by an average of 2% against major foreign currencies, signalling ongoing difficulties in stabilising the local currency.

According to the Bank of Ghana’s latest Summary of Economic and Financial Data, the cedi has depreciated by 2.4% against the US dollar, 3.0% against the euro, and 0.8% against the British pound as of January 2025.

As a result, the exchange rate stands at GHS 15.06 per US dollar, GHS 15.69 per euro, and GHS 18.55 per British pound.

However, the actual rates in the forex market are higher, with the dollar trading between GHS 15.90 and GHS 16.20.

This divergence reflects increased import costs and challenges in managing external transactions, compounding the pressures on the local economy.

The cedi’s depreciation can be attributed to several factors, including:

• High Demand for Foreign Exchange: Import activity and the servicing of external debt have placed considerable pressure on the cedi, driving up demand for foreign currencies.
• Global Financial Conditions: Tightening global financial conditions have contributed to the cedi’s weakness, as access to foreign currency becomes more difficult and expensive.
• Fiscal Imbalances and High Inflation: Persistent fiscal imbalances, coupled with high inflation rates, have further undermined the currency’s value, signalling a need for more robust economic policies.

To address the depreciation, experts and industry players have suggested several measures that could help stabilise the cedi:

• Boosting Foreign Exchange Reserves: The government and the central bank are expected to focus on increasing foreign exchange reserves as a key step to alleviating currency pressures.
• Export Diversification: Reducing the country’s reliance on imports and diversifying exports could help reduce the pressure on the cedi.
• Prudent Fiscal Policies: Ensuring sound fiscal management and reducing the country’s fiscal deficit could stabilise the currency and restore confidence in the economy.

The performance of the cedi will remain a key indicator for Ghana’s economic recovery in 2025. With the local currency continuing to face challenges, the government’s response to the economic pressures—through measures aimed at boosting reserves, improving the balance of payments, and addressing fiscal imbalances—will be critical to determining the long-term stability of the cedi and the broader economy.

The government, central bank, and key stakeholders will need to collaborate on comprehensive solutions to combat the continued depreciation and its effects on import costs, external transactions, and inflation. The coming months will be crucial in shaping the outlook for Ghana’s currency and economy.