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How President Mahama Is Strengthening the Cedi — and Why U.S. Dollar Weakness Is Fueling the Rally

Published on 2025-05-25T01:29:27 by Lisa Schleifer

Ghana’s economy is experiencing a significant recovery. This article explores how domestic leadership and global economic trends are intersecting to drive a stronger cedi.

Since returning to power in 2025, President John Mahama has prioritized stability and recovery. Within months, Ghana’s cedi appreciated nearly 24 percent against the U.S. dollar. This turnaround is the result of several key policy decisions.

President Mahama’s administration has implemented fiscal tightening measures. Over GHS 10 billion in government spending was cut within the first five months. The administration rolled back the controversial e-levy, reduced import duties, and implemented a hiring freeze. These moves have helped reduce the public wage bill and enhance fiscal discipline.

In addition to cutting costs, the administration has worked to restore investor confidence. Foreign investors have renewed interest in sectors like mining, agriculture, and fintech. Ghana’s IMF-backed reforms have further bolstered this confidence, resulting in the disbursement of the second tranche of a $3 billion support package.

The Bank of Ghana has also played a central role in this recovery. It injected over $425 million into the retail foreign exchange market to stabilize the cedi. The policy rate has remained at 28 percent to keep inflation in check and maintain the attractiveness of cedi-denominated assets. Ghana’s foreign reserves now exceed $10 billion, equivalent to about five months of import cover.

The country’s strong export performance and a surge in remittances have provided additional support. Gold exports alone reached over $2.3 billion in the first quarter of 2025, while cocoa prices hit 40-year highs. Remittances have also increased, fueled by improved confidence in domestic financial institutions and more favorable exchange rates.

U.S. President Donald Trump economic policies continue to influence global financial dynamics. Trade protectionism and unilateral policies initiated weakened long-term confidence in U.S. supply chains and contributed to a broader global move away from the U.S. dollar. Tax repatriation incentives implemented under his administration have largely run their course, slowing dollar inflows. As a result, the dollar has weakened globally, creating a favorable environment for emerging market currencies like the cedi.

The global economic climate has further supported the cedi. The Federal Reserve’s pause in interest rate hikes has made emerging markets more attractive to investors. Since commodities are priced in dollars, a weaker dollar means higher local earnings for exporters like Ghana. As capital rotates back into high-growth frontier markets, Ghana is among the beneficiaries due to its recent economic reforms.

The appreciation of the cedi has had notable domestic impacts. Imports have become cheaper, leading to a reduction in prices for fuel, electronics, and other goods. Inflation eased to 21.2 percent in April, down from over 23 percent in January. Small and medium-sized enterprises have reported improved business conditions, citing easier planning and restocking due to currency stability.

Despite these gains, there are risks. Commodity price volatility could affect foreign exchange earnings. Ghana’s continued reliance on gold and cocoa exposes it to external shocks. Additionally, election-year pressures could lead to fiscal slippage, undermining recent progress.

Looking ahead, the sustainability of the cedi’s appreciation depends on maintaining fiscal discipline, continuing economic diversification, and remaining resilient in the face of external shocks. If President Mahama’s administration stays the course and global trends remain favorable, the cedi may continue to strengthen.

President Mahama’s return has signaled a renewed commitment to sound economic policy. With support from international partners, tighter budgeting, and export surpluses, Ghana is demonstrating what can be achieved through effective governance and timely reforms. The cedi’s rise reflects new economic confidence and the possibility of sustained growth.