When the Bank of Ghana (BoG) announced plans to sell up to US$1.15 billion in foreign exchange this October, after already injecting over US$4 billion earlier in the year, the move was billed as a stabilizing measure for the cedi.

On paper, such interventions are normal for central banks seeking to calm currency volatility. But in Ghana’s current economic climate, this operation may be less a stabilizer and more a stress test of our fragile recovery.

In orthodox monetary management, central banks engage in FX intermediation when their fundamentals are strong; robust reserves, low inflation, fiscal stability, and manageable debt. Yet, BoG’s own Summary of Economic and Financial Data (September 2025) tells a different story.

Inflation still hovers at 11.5%, well above the target band of 8±2%. The cedi depreciated by 21% between May and September, slipping from GH¢10.3 to GH¢12.15 per US dollar.

Meanwhile, reserves stand at US$10.7 billion, or just 4.5 months of import cover, hardly the cushion needed for such large-scale market sales.

The policy dilemma is clear. If BoG sells unsterilised dollars (does nothing to absorb the cedi liquidity created), it risks fuelling inflation and undoing months of price gains. If it sterilises (mops up excess liquidity through bonds or bills), it raises interest costs and strains already tight public finances.

Either way, Ghana loses, one path bleeds price stability, the other drains fiscal space.

This comes at a time when the Monetary Policy Rate (25%) remains steep, signalling ongoing inflationary risk, while 91-day Treasury yields have tumbled to 10.26%, reflecting excess liquidity and potential market distortions.

The fiscal balance has improved modestly to a -1.4% deficit (cash basis), but not enough to absorb the sterilisation cost of another billion-dollar liquidity cycle. In truth, BoG’s decision resembles firefighting rather than strategy.

FX interventions are meant to fine-tune market conditions, not to compensate for unresolved structural weaknesses. Ghana is not yet in the macroeconomic position where such heavy injections can stabilise without collateral

damage.

Until inflation, fiscal prudence, and reserve buffers align, the cedi will keep winning short battles but losing the long war.

Written by Prof. Isaac Boadi, Dean, Faculty of Accounting and Finance, UPSA, & Executive Director, Institute of Economic and Research Policy