Absa, a prominent African bank, recently shared its thoughts on the surprising surge of the Ghana cedi. In their statement titled “Ghana Market Insight,” released on May 12, 2025, Absa expressed that while the Bank of Ghana’s decision to inject more hard currency into the interbank market contributed to the cedi’s recent strong performance, they believe that this rally may have been too aggressive.
Expert Analysis:
As reported by Joy Online, Absa emphasized that despite factors like high gold and cocoa prices boosting export receipts and bolstering Ghana’s reserves to multi-year highs, they anticipate a potential pullback towards an exchange rate of 14.00/USD by year-end.
The local currency has historically struggled with consistent depreciation over the years. However, in recent months, supported by increased exports due to favorable commodity prices and improved reserve levels, the cedi has experienced a remarkable rally. The injection of hard currency into the market by the Bank of Ghana further accelerated this upward trend.
Diving Deeper into Absa’s Statement:
According to Absa’s analysis highlighted in their statement:
– The cedi appreciated significantly over a short period.
– After stabilizing at 15.50/USD for two months, it rallied by 19% to reach 13.05/USD.
– Increased foreign exchange (FX) support from the Bank of Ghana boosted market confidence.
– Ghana’s net reserves grew substantially from 1.8 to 3.0 months of imports within a year.
This growth can be attributed partly to strategic decisions such as accumulating gold reserves instead of fiat currency and establishing control over gold trade through initiatives like the creation of the GoldBod.
Looking Ahead: Economic Forecast and Current Account Surplus
With expectations of sustained high gold and cocoa prices due to supply constraints in other regions and new mines coming online in 2025, export revenues are set to remain robust. This optimistic outlook is also fueled by global uncertainties driving investors towards safe-haven assets like gold.
Absa predicts that these factors will contribute to an improvement in Ghana’s current account surplus from last year’s figures—a positive sign for economic stability moving forward.
The Future Exchange Rate Scenario
While Absa anticipates an overall strengthening of the cedi in 2025 compared to previous years’ averages, they caution against its current strength. Their analysis suggests that relative to historical trends, there is an overvaluation concern which could impact competitiveness negatively.
To achieve better balance and ensure long-term competitiveness through purchasing power parity (PPP), Absa recommends a modest adjustment towards a more sustainable exchange rate level around 14.00/USD by end-of-year.
In conclusion,
the unexpected rise of the Ghana cedi has sparked discussions about sustainability versus competitiveness within financial circles—as reported by Joy Online.
Attribution: This article was adapted from content originally reported on Joy Online: https://www.myjoyonline.com/absa-ghana-cedi-rallied-too-far/
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