Ghana’s currency has recorded its first full-year gain against the U.S. dollar in more than 30 years, buoyed by surging gold prices, rising reserves, and a weakening greenback.
- Ghana’s cedi has achieved its first annual appreciation in over 30 years, increasing by approximately 41% in 2023.
- The strength of the cedi is attributed to high gold prices, increased reserve levels, and a weakening U.S. dollar.
- A new initiative, GoldBod, was launched to formalise gold production and improve economic stability in the sector.
- Fiscal restraint and reduced deficit levels have played a significant role in bolstering investor confidence in Ghana.
Ghana’s currency has recorded its first full-year gain against the U.S. dollar in more than 30 years, buoyed by surging gold prices, rising reserves, and a weakening greenback.
The cedi has strengthened about 41% this year, marking its first annual appreciation since at least 1994, according to Bloomberg. That performance makes it the world’s second-best performing currency after the Russian ruble, among 144 tracked globally.
Ghana’s central bank has boosted bullion purchases, lifting gross international reserves by 24% to $11.4 billion as of October.
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In May, the government launched GoldBod, a state entity tasked with buying gold from small-scale miners, an initiative aimed at channelling informal production into the formal economy and curbing smuggling.
Gold has had its strongest year since 1979, with GoldBod exporting more than 25,780 kilograms of gold in the third quarter, marginally surpassing shipments from large-scale mines.
Reforms restore confidence
Fiscal restraint has also supported the currency. Spending cuts introduced after Ghana’s debt restructuring last year have reduced dollar demand, said Wilson Elorm Zilevu, an economist at Databank Group in Accra.
President John Mahama, who took office in January, has committed to tightening public finances under a $3 billion IMF programme secured in 2023 after Ghana’s debt default.
The government is on track to meet its budget-deficit target of 2.8% of GDP this year and plans to narrow the gap to 2.2% by 2026.
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Lower deficits have helped tame inflation, easing pressure on interest rates and lifting investor appetite for Ghanaian assets. The country’s restructured dollar bonds have returned more than 30% this year, ranking among the top five performers in emerging markets.
The gold rally has also lifted other African currencies. In Zimbabwe, surging bullion prices and a steady accumulation of foreign-exchange reserves have strengthened confidence in the country’s gold-backed currency.
Business Insider Africa recently reported that Zimbabwe’s unit reached its strongest level against the dollar since January, supported by rising gold earnings and improving reserve buffers.
