Foreign exchange (FX) reserves climbed to their highest level in more than a year in May, but the gains have yet to halt pressure on the cedi as rising corporate dollar demand, seasonal dividend repatriation and elevated oil prices continue to weigh on the currency.
Recent data from the Bank of Ghana showed gross international reserves rising to US$14.4billion as of May 18, 2026, equivalent to 5.7 months of import cover – up from US$13.8billion at the end of December 2025.
The reserve build-up coincided with an improvement in Ghana’s external position in the first quarter, with the current account surplus widening to US$3.10billion from US$2.43billion for the corresponding period of 2025.
Bank of Ghana Governor, Dr Johnson Pandit Asiama said during the central bank’s 130th Monetary Policy Committee press briefing that the stronger external position was driven by robust gold and cocoa export earnings as well as resilient remittance inflows, despite rising payments for services and investment income.
Yet the stronger reserve position has not translated into cedi stability.
The cedi depreciated by 8.4 percent against the US dollar in the interbank market in the year to May 15, according to the central bank, while market analysts estimate losses have widened further in recent weeks.
Databank Research said the currency’s year-to-date depreciation had extended to 10.11 percent by the close of the third week in May, amid sustained foreign exchange demand pressures.
The local currency closed at mid-market interbank rates of GH¢11.63 per US dollar over the latest two-week period tracked by Databank, while retail market rates weakened to about GH¢12.20 per US dollar.
Dr Asiama attributed the current pressure primarily to increased dollar demand from the energy sector and seasonal dividend payments by multinational companies. He said the central bank’s regular FX auctions remained active and adequately supplied.
“Our auction is still there. We have announced it, pre-announced it; the banks are aware. We continue doing what we are doing,” the Governor said.
The IMF had earlier flagged the scale of the central bank’s FX market presence as a concern. In 2025 the pace of intermediation intensified, with US$1.4billion injected in the first quarter alone before full-year efforts reached approximately US$10billion, driven by the Domestic Gold Purchase Programme amid surging gold prices.
Based on the IMF’s policy advice on a formal FX intervention framework, BoG subsequently operationalised a Foreign Exchange Operations Framework under which auctions are conducted twice-weekly and monthly targets are pre-announced to licenced banks; the kind of rules-based structure the Fund had called for.
Dr. Asiama stressed that the central bank is not engaging in extraordinary market intervention despite the depreciation pressures, arguing the current strategy is focused on preserving and rebuilding reserve buffers after recent years of macroeconomic instability.
“We are not intervening; we are rather building reserves. The auctions are a regular part of our intermediation efforts,” the Governor said.
According to the Governor, BoG has continued to provide FX liquidity through its twice-weekly auctions, with around US$1billion programmed for release into the market this month.
“We have not reduced our presence at all. The banks are aware of it. There should not be too much panic about that,” he added.
The central bank’s posture suggests policymakers are attempting to balance two competing objectives: that is, maintaining reserve adequacy while limiting excessive exchange-rate volatility which could reverse recent disinflation gains.
Databank Research said the cedi’s recent depreciation exceeded its upper-band forecast of GH¢11.40 per US dollar, partly because BoG appeared cautious in its FX intermediation despite expectations of a likely US$385million disbursement from the International Monetary Fund (IMF).
The research firm said the central bank’s approach may reflect “a deliberate effort to preserve reserves while awaiting clearer and more sustainable inflow visibility, particularly amid lingering demand pressures”.
Analysts say the strategy is a reflection of lessons from the nation’s recent balance-of-payments crisis, when aggressive reserve drawdowns failed to prevent a sharp depreciation of the cedi and eventually forced the country into an IMF-supported economic recovery programme.
Nonetheless, the current depreciation cycle carries risks for inflation and fuel prices, particularly as geopolitical tensions in the Middle East continue to support elevated crude oil prices.
Dr Asiama acknowledged that external developments remained a key variable for Ghana’s FX market outlook. He said any easing in Middle East tensions and a decline in oil prices toward US$70 or US$80 per barrel could help moderate domestic FX pressures.
“But for now, the pressures are real and we understand why they must be there at this time,” he said.
A market analyst familiar with the central bank’s strategy on an X post said Ghana’s underlying foreign exchange supply position remains relatively strong, largely because of elevated gold prices and continued purchases by the Ghana Gold Board from the artisanal and small-scale mining sector.
The analyst added that the Bank of Ghana appears willing to allow the cedi’s gradual adjustment toward what he described as its “true value” while simultaneously repairing its balance sheet. However, he warned that authorities may eventually face pressure to intensify intervention efforts if currency weakness significantly feeds into domestic fuel prices and broader inflation.
Market expectations remain cautious. Databank forecasts the cedi to trade within a range of GH¢11.55 to GH¢11.86 per US dollar over the next two weeks, with the outlook dependent on the balance between foreign exchange demand and the scale of central bank supply into the market.
Source: thebftonline.com