Value of Bank of Ghana’s Forex Intermediation

The Bank of Ghana has restructured its Foreign Exchange Intermediation: The BoG sold about $10 billion into the FX market between January and December 2025 under its Foreign Exchange Intermediation Programme. The $10 billion forex intermediation effort was effective and structurally sound in 2025, as it helped the Central Bank and the government to achieve their goal of supporting the cedi and market functioning without compromising reserves. However, it’s not a silver bullet. Lasting forex stability and competitiveness depend on deeper economic reforms and genuine growth in foreign exchange supply sources than just the current source of forex supply.

The existing forex intermediation strategy is only a stabilisation tool, not a development strategy. Sustainability of the Central Bank’s Forex Intermediation Programme depends largely on export growth – manufacturing, services, value-added to minerals and other export commodities, increased formal remittance accumulation, reduced imports and fiscal discipline to avoid FX-fuelled deficits.

The fundamental structures of the economy that can accelerate massive foreign exchange earnings from other sources other than gold have not significantly been altered – the manufacturing sector, the agricultural sector, the services sector, for instance, have not been developed differently and significantly as inherited.

In the medium to long-term, the Forex Intermediation Programme of the Central Bank of Ghana will be weakened by risk of a single-commodity dependency for forex earnings. The sharp appreciation of the cedi, the local currency, has impacted negatively on remittances and export earnings of other sectors, for instance cocoa in the agricultural sector. There are weak incentives for export diversification and a potential exposure if gold-based FX inflows fall as a result of a fall in gold prices on the international market. The strategy that ensured a successful management of the exchange rate, that led to the appreciation of the cedi, is a short-term management tool. Ghana still needs a stronger export growth, better FX earning channels, and deeper hedging or market mechanisms to reduce reliance on the Central Bank’s forex liquidity through gold trading.

FX interventions can smooth volatility, but they don’t substitute for real increases in forex earning ability – exports, investment inflows, remittances channelled through banks. Ghana still faces underlying forex constraints like insufficient export inflows, reliance on remittances which often stay outside the banking system, and possibly high import demand. Cheaper FX can encourage imports rather than substitution. Domestic producers may struggle to compete if FX is persistently cheap.

In the short-term, the over-all cost-benefit outcomes of the BoG’s Forex Intermediation Programme are seen in lower inflation trajectory, stabilised import prices, reduced debt-service burden, improved market confidence etc. In Ghana, exchange rate pass-through is strong. When the cedi depreciates, prices rise quickly, and this causes an increase in inflation. By supplying dollars and reducing cedi volatility, the Bank of Ghana lowered the cost of imported goods like fuel, medicines, machinery etc. The Central Bank equally prevented panic pricing and speculative hoarding of foreign currencies. The strategy softened imported inflation, especially non-food inflation. Inflation supressed faster than it would have under a freely depreciating cedi.

From a currency stabilisation stance, the programme achieved its core objective. In the absence of such an intervention, the cedi would likely have depreciated sharply, worsening inflation and causing fiscal stress. Yet the programme does not produce a long-term value that is paired with industrial and export policies. Without pairing the value of the Bank of Ghana’s forex intermediation with any industrial and export policies of Ghana, FX intermediation risks strengthening Ghana’s import-dependency growth.

Despite its successes, there are critical policy concerns about the Central Bank’s Forex Intermediation Programme: dependency and sustainability. The BoG exclusively relies on proceeds from the sale of gold as remittances have dwindled, export earnings have reduced, and foreign direct investments (FDIs) have not increased exponentially. The sustainability issue of the programme should engender some policy concerns regarding future gold prices and the volumes of gold exported.

The true economic value of the Bank of Ghana’s FX intermediation strategy lies in policymakers implementing transformative and critical economic reforms that impact on the fundamental structures of the economy. FX intermediation can stabilise an economy, but only production, exports, and productivity can sustain it. It is not a permanent macroeconomic management tool. There must be a more self-sustaining foreign exchange earning ecosystem.

Emmanuel Kwabena Wucharey
Economics Tutor, Advocate and Religion Enthusiast

   Comments0