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Dr George Domfe, Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP) and the Centre for Social Policy Studies (CSPS) at the College of Humanities, University of Ghana, has cautioned that while the recent appreciation of the Ghanaian cedi and the country’s historic trade surplus may give cause for celebration, the underlying economic structure still harbors vulnerabilities that must not be overlooked.
He made these remarks during a press conference held at the Ghana International Press Centre on the theme “Unpacking Critical Elements of the Govt’s 2025 Mid-Year Fiscal Review”, where he gave a vivid presentation on Monetary Policy.
Addressing members of the media, Dr. Domfe stated, “Appreciation today? Celebrate, but don’t ignore the structural cracks.”
He explained that the Ghanaian currency has faced decades of depreciation against major international currencies due to the country’s persistent reliance on imports.
Historically, he stated Ghana maintained a fixed exchange rate regime in the years following independence, but has since transitioned to a managed floating exchange rate system.
Several factors
Dr Domfe elaborated that several factors on both the supply and demand sides are currently supporting the appreciation of the cedi. On the supply side, increased foreign direct investment, the export of key commodities such as gold, crude oil, cocoa, and timber, as well as inflows from loans, grants, and remittances, are all helping to boost foreign currency reserves.
He noted that other contributors to foreign currency inflows include the growing number of foreign students attending Ghanaian educational institutions and West African nationals seeking healthcare services in the country.
Dr Domfe also highlighted that on the demand side, government expenditure has remained relatively low due to the current administration’s decision to review contracts initiated by the previous government.
Consequently, many contractors have not been paid since the beginning of the year, reducing the outflow of funds.
Additionally, he noted that a fall in global crude oil prices, though Ghana is a net exporter, has contributed positively to cedi stability by lowering the cost of imported oil-based products.
Ghana’s successful debt restructuring programme, he added, has significantly enhanced the country’s debt sustainability profile and boosted investor confidence, resulting in increased foreign capital inflows.
Highest merchandise trade surplus
Ghana’s merchandise trade performance reached a historic milestone in 2024, with the country recording a trade surplus of 4.98 billion US dollars, the highest in more than a decade.
This remarkable achievement was driven primarily by a significant rise in merchandise exports, particularly from the gold and crude oil sectors.
The data was captured in the government’s fiscal report, specifically in Table 22 of the 2024 Mid-Year Budget Statement.
According to the figures, Ghana’s total merchandise exports on a free-on-board basis amounted to 20.22 billion US dollars in 2024. This represents a considerable increase from the 16.7 billion dollars recorded in 2023.
During the same period, merchandise imports grew modestly from 14.08 billion dollars in 2023 to 15.24 billion dollars in 2024.
The higher growth in exports relative to imports resulted in a robust positive trade balance, highlighting the country’s improved export competitiveness and external sector performance.
Gold exports were the dominant contributor to the export surge, reaching 11.64 billion dollars in 2024.
This represents a significant jump from the 7.6 billion dollars recorded in the previous year, marking the highest value of gold exports over the past ten years.
The increase is attributed to favorable global market prices as well as enhanced gold production in the country.
Crude oil exports also experienced a notable improvement. In 2024, crude oil export earnings rose slightly to 3.87 billion dollars, up from 3.83 billion dollars in 2023. Although this figure is lower than the 5.43 billion dollars recorded in 2022, it nonetheless signals a steady performance in the petroleum sector.
In addition to gold and crude oil, cocoa products generated 946.06 million dollars in export revenue in 2024, reflecting a modest recovery from the previous year’s figure of 792.40 million dollars.
However, cocoa beans experienced a sharp decline in export value, falling to 750.05 million dollars in 2024 from 1.36 billion dollars in 2023. This drop may be attributed to fluctuations in global demand or production challenges.
Timber and timber products also contributed to the export portfolio, bringing in 128.10 million dollars in 2024, a slight decline from 145.48 million dollars in 2023. Other exports, which include electricity, residual fuel oil, manganese, bauxite, and diamonds, among others, generated 2.89 billion dollars in revenue, slightly lower than the 2.97 billion dollars recorded in the previous year.
On the import side, Ghana’s merchandise imports stood at 15.24 billion dollars in 2024, up from 14.08 billion dollars in 2023.
This increase was primarily driven by a rise in non-oil imports, which reached 10.76 billion dollars in 2024.
The oil and gas component of imports also increased slightly to 4.48 billion dollars from 4.48 billion dollars the previous year, reflecting growing domestic energy demand and possible changes in international crude prices.
Over the past decade, Ghana’s trade balance has seen considerable fluctuations. In 2015, the country recorded a trade deficit of 3.14 billion dollars.
This was followed by another deficit of 1.78 billion dollars in 2016. However, in 2017, Ghana reversed this trend with a surplus of 1.19 billion dollars. From that point forward, the country generally maintained a positive trade balance.
In 2018, the surplus rose to 1.81 billion dollars, followed by 2.26 billion dollars in 2019 and 2.04 billion dollars in 2020.
Although the surplus narrowed to 1.10 billion dollars in 2021, it rebounded to 2.87 billion dollars in 2022 and slightly declined to 2.69 billion dollars in 2023. The 2024 surplus of 4.98 billion dollars is the largest recorded within the period, signaling a strong external sector performance.
