{"id":68327,"date":"2025-10-11T17:34:17","date_gmt":"2025-10-11T17:34:17","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/68327\/"},"modified":"2025-10-11T17:34:17","modified_gmt":"2025-10-11T17:34:17","slug":"bogs-us1-15-billion-fx-sale-a-risky-cure-for-a-fragile-economy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/68327\/","title":{"rendered":"BoG\u2019s US$1.15 billion fx sale: A risky cure for a fragile economy"},"content":{"rendered":"

When the Bank of Ghana (BoG)<\/a> 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 stabilising measure for the cedi.<\/p>\n

On\u00a0 paper, such interventions are normal for central banks seeking to calm currency\u00a0 volatility. But in Ghana\u2019s current economic climate, this operation may be less a\u00a0 stabilizer and more a stress test of our fragile recovery.<\/p>\n

In orthodox monetary management, central banks engage in FX intermediation when their\u00a0 fundamentals are strong, robust reserves, low inflation, fiscal stability, and manageable debt.<\/p>\n

Yet,\u00a0 BoG\u2019s own Summary of Economic and Financial Data (September 2025) tells a different story. Inflation still\u00a0 hovers at 11.5%, well above the target band of 8\u00b12%.<\/p>\n

The cedi depreciated by 21% between May\u00a0 and September, slipping from GHS10.3 to GHS12.15 per US dollar. Meanwhile, reserves stand at\u00a0 US$10.7 billion, or just 4.5 months of import cover, hardly the cushion needed for such large-scale\u00a0 market sales.<\/p>\n

The policy dilemma is clear. If BoG sells unsterilized dollars (does nothing to absorb the cedi liquidity\u00a0 created), it risks fuelling inflation and undoing months of price gains. If it sterilizes (mops up excess\u00a0 liquidity through bonds or bills), it raises interest costs and strains already tight public finances.\u00a0 Either way, Ghana loses, one path bleeds price stability, the other drains fiscal space.<\/p>\n

This comes at a time when the Monetary Policy Rate (25%) remains steep, signaling ongoing\u00a0 inflationary risk, while 91-day Treasury yields have tumbled to 10.26%, reflecting excess liquidity\u00a0 and potential market distortions. The fiscal balance has improved modestly to a -1.4% deficit (cash\u00a0 basis), but not enough to absorb the sterilization cost of another billion-dollar liquidity cycle.<\/p>\n

In truth, BoG\u2019s decision resembles firefighting rather than strategy. FX interventions are meant to\u00a0 fine-tune market conditions, not to compensate for unresolved structural weaknesses.<\/p>\n

Ghana is not\u00a0 yet in the macroeconomic position where such heavy injections can stabilize without collateral\u00a0 damage. Until inflation, fiscal prudence, and reserve buffers align, the cedi will keep winning short\u00a0 battles but losing the long war.<\/p>\n

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