Senior Research Fellow at IFS, Dr. Said Boakye
The Institute for Fiscal Studies (IFS) is calling for a fundamental shift in the country’s approach to managing its external sector, arguing that reliance on merchandise exports has done little to support the cedi’s stability.
The policy think-tank is urging government to reconsider the ownership structure of Ghana’s two largest exports – gold and oil – to ensure that more foreign exchange earnings remain within the economy.
Dr. Said Boakye, a senior research fellow at IFS, presented the recommendations at a press briefing ahead of the 2025 budget presentation in parliament on March 11.
He explained that despite Ghana’s consistent trade surpluses in recent years, the cedi has continued to depreciate sharply – highlighting structural weakness in the country’s balance of payments.
“Merchandise exports have been the primary driver of Ghana’s trade and current account balances, yet they have failed to significantly impact the cedi’s strength against foreign currencies. This paradox underscores a fundamental flaw in Ghana’s economic structure – the fact that our major export revenues do not adequately circulate within the domestic economy,” Boakye said.
Data from the Bank of Ghana show that between 2017 and 2023 the country recorded positive trade balances each year, with total merchandise exports rising from an average US$14.8billion between 2017 and 2019 to US$17.1billion between 2022 and 2023.
However, this increase did not translate into exchange rate stability. Instead, the cedi’s depreciation rate surged from an annual average of 8.7 percent between 2017 and 2019 to 28.9 percent in the 2022-2023 period.
The reason, according to IFS, lies in the extractive sector’s ownership structure.
Dr. Boakye pointed out that multinational companies dominate Ghana’s gold and oil industries, retaining control over export revenues.
Even when these revenues are recorded in Ghana’s balance of payments, a significant portion does not enter the country’s financial system.
This limits the Bank of Ghana’s ability to use export earnings to stabilise the cedi, leaving government dependent on external borrowing to manage exchange rate fluctuations.
“The fundamental issue is that while gold and oil account for nearly 70% of Ghana’s total merchandise exports, the revenue generated from these sectors does not fully benefit the Ghanaian economy,” Dr. Boakye noted.
“Much of it remains in the hands of multinational corporations – and even the portion that returns does not contribute directly to the central bank’s reserves.”
The IFS highlights how Ghana’s reliance on external borrowing to stabilise the cedi has led to a cycle of debt accumulation and currency crises. Between 2017 and 2019, Ghana maintained an average capital and financial account balance of US$2.5billion, which helped keep cedi depreciation at 8.7 percent.
However, after Ghana lost access to international capital markets in 2022 due to a sovereign credit downgrade, the capital and financial account balance turned negative at – US$1.4billion, resulting in a sharp 28.9 percent depreciation of the cedi.
To break this cycle, IFS is recommending a restructuring of Ghana’s extractive sector ownership model.
The think-tank proposes two key strategies: increasing state participation in gold and oil production through joint ventures or adopting production-sharing agreements, which would allow government to retain a larger share of export revenues.
“Taking commanding interests in gold and oil through joint ventures or production-sharing agreements is not just an economic necessity; it is a strategic move to secure Ghana’s financial stability,” Dr. Boakye stated.
“This approach will generate more fiscal revenue for government while also ensuring that a substantial portion of foreign exchange earnings remains within the country to support the cedi,” he added.
IFS warns that without such reforms, the nation will remain vulnerable to currency volatility and economic crises.
The country’s dependence on external borrowing to manage exchange rate fluctuations has repeatedly led to unsustainable debt accumulation, triggering fiscal distress.
The policy think-tank argued that the current crisis, which began in 2022, is a direct result of this pattern.
“If we want to stabilise the cedi without relying on foreign debt, we must rethink how we manage our natural resources. The time to act is now,” Dr. Boakye said.
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