The cedi began the year on a relatively stable note, but just six weeks in, it has experienced a concerning rate of decline.

Bank of Ghana data shows that the cedi depreciated from GH₵14.5 per dollar at the beginning of January to GH₵15.55 per dollar currently, with even higher rates recorded at forex bureaus.

This 6.5% depreciation in the first six weeks of the year has raised concerns, with analysts predicting that if the trend continues, the cedi could depreciate by over 50% against the US dollar by the end of 2025.

The government has been urged to take immediate measures to curb the rapid depreciation before it worsens.

Meanwhile, despite a 5.65% drop in global crude oil prices, the cedi’s depreciation has led to a rise in fuel prices in Ghana.

A recent press release by the Institute for Energy Security (IES) revealed that in the first pricing window of February 2025, fuel prices in Ghana surged for the third time this year.

Gasoil prices rose by GH₵0.45 per litre, while gasoline increased by GH₵0.24 per litre.

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He attributes this trend to the lack of a robust macroeconomic policy support for the cedi.

Speaking on Joy FM’s Super Morning Show on Monday, May 13, Prof Bokpin explained that the cedi has persistently suffered depreciation since its introduction in July 1965.

He anticipates intermittent periods of relative stability but underscores the likelihood of continued depreciation, even with optimal economic measures in place.

“If we do everything right we will still expect that the cedi will depreciate by a certain margin given the relative strength of the economy.

“It’s a shame that we haven’t been able to provide the cedi with the necessary support through sound macroeconomics policy making, including responsible fiscal management and prudent monetary policy.

“As a result, we’ve denied the cedi some basic rights and then expect it to perform magic, when in reality, the cedi’s behaviour is a reflection of weak underlying fundamentals”explained.

In referring to the Vice President, Dr Mahamudu Bawumia’s popular phrase about the cedi’s depreciation, Prof Bokpin argued that the exchange rate will expose the currency as long as the fundamentals of the economy remain weak.

Prof Bokpin mentioned that in 1964, Ghana had inflation of less than 1%. At that time, Ghana did not have its national currency and used the British West African pound, limiting its monetary control.

He said even after gaining independence, printing currency remained out of reach, until in July 1965 when the cedi was introduced. However, inflation has been a continuous challenge since then.

As of today, Monday, May 13, one US dollar averages GH¢14.5 according to Joy Business.

Analysts are envisaging a continuous weakening trajectory of the local currency as foreign exchange demand-supply disparity remains substantial.

They, however, anticipate improved liquidity conditions towards the end of quarter two of 2024 after the International Monetary Fund (IMF) board approves the second review of Ghana’s programme. This will lead to a tranche disbursement of US$360 million under the IMF programme.

The Bank’s affirmation follows the depreciation of the cedi by a marginal 0.25 percentage points against the American dollar eleven (11) days into the first quarter of 2021.

The cedi on Monday, January 11, 2021 was trading at GHS 5.76 against the US dollar.

The cedi, in the first quarter of every year, usually comes under some pressure due to the high demand for dollars by businesses to finance imports often resulting in a depreciation of the local currency.

To tackle the depreciation of the cedi in the first quarter of the year, the Bank of Ghana (BoG) has allotted close to $60 million per its bi-weekly forex forward auctions for Q1 2021.

In total, the BoG will be selling a total of $300 million in its forex forward auctions in Q1 2021 alone.

Speaking to the media, economist with DataBank, Courage Martey, noted that the amount of dollars to be sold by the BoG in Q1 2021 alone, is a recognition of the pressure the cedi goes through in the first quarter of every year by the Central Bank.

“The amount of dollars to be sold in the first quarter shows a much bigger amount to be sold in the market for the first quarter compared to what is to be sold in the subsequent quarters and this is a recognition of the pressure the cedi goes through the first quarter. This is twice the amount to be sold in subsequent quarters,” he said.

The cedi, for the whole of last year – 2020 – depreciated by 3.9 per cent, a depreciation rate performance partly achieved due to a weaker dollar caused by the impacts of the Covid-19 pandemic.