BoG defies Mahama on injecting dollars to safe cedi

The Bank of Ghana’s continued supply of foreign exchange to the market has sparked a fresh debate after President John Dramani Mahama publicly declared that his administration had ceased pumping dollars into the economy to support the cedi.

While the President’s remarks suggested a clear policy break from past practices of defending the local currency through direct intervention, disclosures from the central bank show that dollar sales have, in fact, continued—though under a restructured framework that the BoG insists is fundamentally different from ad-hoc currency support.

President Mahama’s comments came against the backdrop of renewed efforts to curb the “dollarisation” of the economy as the International Monetary Fund, IMF also kicked against the BoG’s market intervention.

As part of this broader policy shift, the government directed that all state contracts be priced in cedis and signalled an end to discretionary forex injections that target specific exchange rate levels.

The President argued that allowing the cedi to adjust more freely would strengthen market discipline and reduce the artificial dependence on central bank support.

However, official figures released by the Bank of Ghana reveal that about $10 billion has been injected into the forex market since January 2025 through regular sales to commercial banks and businesses. Initially, the BoG denied the market intervention until the IMF blew it cover, before admitting to the pumping of dollars to safe the cedi.

These transactions, which span the period from January to the first week of December 2025, were executed through structured and transparent auctions designed to meet legitimate import demand and manage short-term volatility in the market.

The central bank has been quick to clarify that these dollar sales should not be interpreted as a contradiction of government policy.

According to BoG officials, the operations are conducted on a market-neutral basis, meaning they are not intended to prop up the cedi at a particular level but to ensure liquidity and orderly trading in the foreign exchange market. Monthly auction volumes have fluctuated, with December 2025 targets reduced to about $800 million, following heavier supply earlier in the year.

In some weeks, smaller tranches—sometimes cited publicly as $10 million injections—have fed perceptions of intensified intervention.

Funding for the programme has largely come from the Bank of Ghana’s Domestic Gold Purchase Programme, which has generated significant inflows due to favourable global gold prices.

The BoG says these resources have allowed it to support the forex market without eroding international reserves or compromising the external debt obligations.

Portions of the gold proceeds have also been allocated to reserve build-up and upcoming repayments.

Reserve data appear to support this claim. The gross international reserves increased from about $9.1 billion in December 2024 to $11.4 billion by October 2025, with projections pointing to a year-end figure above $12 billion.

Market analysts argue that this upward trend indicates that the dollar supply programme has not weakened the country’s external position.

The impact on the cedi has been pronounced. In October 2025 alone, the BoG injected approximately $1.15 billion under its FX Intermediation Programme, a move widely credited for driving the currency’s strong rally during that period.

By the end of October, the cedi had appreciated 13.9 per cent against the US dollar for the month and 32.2 per cent year-to-date, marking one of its best performances in years.

To bring clarity to its approach, the Bank of Ghana in November rolled out a new Foreign Exchange Operations Framework, approved by its Board.

The framework reinforces the central bank’s commitment to macroeconomic stability, inflation targeting and a flexible, market-driven exchange rate regime. It outlines three key objectives: supporting reserve accumulation, reducing excessive short-term volatility, and intermediating forex inflows—particularly from gold purchases and export surrenders—in a transparent, orderly manner.