Managing exchange rates remains a critical challenge

Governor of the Bank of Ghana, Dr Johnson Asiama, has identified the management of exchange rate regimes as one of the most pressing dilemmas facing African central banks today.

Speaking at the launch of the Bank of Ghana Chair in Finance and Economics at the University of Ghana, Dr Asiama noted that despite claims of free-floating exchange rate regimes across the region, most countries remain cautious of depreciation, undermining flexibility and weakening policy credibility.

“While many countries claim to float their currencies, in practice, there is a growing fear of depreciation,” he said.

“This de facto resistance to floating limits policy flexibility and can fuel credibility gaps. As a region, we must be honest about this divergence.” He added

Dr Asiama traced the broader macroeconomic context, recalling how African countries had made significant progress in reducing inflation by the mid 2010s but global shocks, including the COVID 19 pandemic and the Russia Ukraine war, have reversed many of those gains.

“In Ghana’s case, we experienced this vividly in 2022, when inflation hit 54.1 percent, and the cedi depreciated by over 50 percent,” he said. “Food inflation alone spiked to nearly 60 percent. These are not just statistics, they are lived experiences.”

He stressed that the volatility revealed the importance of responsive institutions and agile, data driven policy. “We cannot always prevent global disruptions, but we can control our response,” he added.

The cedi’s sharp rebound in 2025, appreciating over 42 percent year to date and backed by more than US$11 billion in reserves, was cited as proof of what disciplined monetary and fiscal coordination, along with IMF support, can achieve.

By Joyce Kpeglo