Aggressive cedi strengthening is at an ideal price to the country – Bokpin – Life Pulse Daily

Introduction: The Paradox of Cedi Strengthening

The Ghanaian cedi has recently experienced a significant strengthening against the U.S. dollar, a development that has sparked both optimism and concern among economists and policymakers. Professor Godfred Bokpin, an economist at the University of Ghana, has issued a stark warning: while the cedi’s rise may seem beneficial on the surface, it risks undermining long-term economic stability, private sector growth, and environmental sustainability. In an interview with Joy FM’s Newsnight on October 16, 2025, Bokpin argued that the Bank of Ghana’s interventions to maintain a strong cedi are creating unsustainable pressures on the economy. This article explores the implications of the cedi’s aggressive strengthening, the challenges it poses, and the need for a balanced approach to currency management.

Analysis: The Economic and Environmental Costs of Cedi Strengthening

The Current Exchange Rate Landscape

As of October 2025, the Ghanaian cedi has posted remarkable gains against the U.S. dollar, with data from major commercial banks indicating a 5% appreciation on the interbank digital market. This marks the first instance since the third quarter of 2025 when the cedi has shown such sharp movements. While a stronger currency often signals economic confidence, Bokpin emphasizes that the pace and nature of this strengthening are problematic. He argues that the policies driving this trend are not aligned with the broader goals of sustainable development and private sector growth.

The Impact on Private Sector Competitiveness

One of the most pressing concerns raised by Bokpin is the erosion of private industry competitiveness. A strong cedi makes Ghanaian exports more expensive in international markets, reducing their competitiveness compared to goods from other countries. For example, a 5% appreciation of the cedi could increase the cost of Ghanaian goods by 5% in USD terms, making them less attractive to foreign buyers. This, in turn, could lead to reduced export volumes, lower foreign exchange earnings, and a decline in overall industrial output.

Bokpin highlights that the Bank of Ghana’s interventions—such as currency stabilization measures and exchange rate controls—have reduced the availability of credit for businesses. By channeling resources into maintaining the cedi’s value, these policies may have diverted funds that could otherwise support private sector expansion. As Bokpin explains, “The extent of stabilization the Bank of Ghana has accomplished runs into billions of cedis. That credit, which could have been available for businesses to borrow at low price, increase, and create jobs, is now not available.” This shift raises critical questions about the long-term viability of small and medium-sized enterprises (SMEs), which are the backbone of Ghana’s economy.

Environmental and Social Consequences

Beyond economic risks, Bokpin warns that the current trajectory of cedi strengthening is exacerbating environmental degradation and social instability. He points to the persistence of illegal mining, or “galamsey,” as a key driver of this issue. The economist argues that the government’s focus on currency stability has diverted attention from addressing the structural damage caused by unsustainable mining practices. “We are reaching this competitive strengthening of the currency at an ideal price to the country. In a definite stance, we’re reminded to aggressively maintain unlawful mining as a result of we suspect there is usually a structural damage within the supply of gold,” Bokpin states.

This statement underscores the tension between short-term economic policies and long-term environmental stewardship. The cedi’s strength may temporarily boost the value of Ghana’s gold exports, but the unchecked expansion of illegal mining threatens water bodies, ecosystems, and public health. The economist’s warning serves as a reminder that economic growth cannot come at the expense of ecological sustainability.

Summary: A Balancing Act Between Stability and Growth

Professor Godfred Bokpin’s analysis of the cedi’s strengthening highlights a critical dilemma facing Ghana’s economy: the need to stabilize the currency versus the risks of overcorrecting market forces. While a strong cedi can provide short-term benefits, such as increased purchasing power for citizens and a more favorable exchange rate for imports, it also poses significant challenges. These include reduced competitiveness for local industries, diminished access to credit, and environmental harm from unsustainable practices.

The key takeaway from Bokpin’s warnings is the importance of a balanced approach to currency management. Policymakers must consider not only the immediate effects of exchange rate fluctuations but also their long-term implications for economic stability, private sector growth, and environmental health. As the cedi continues to gain strength, the government must weigh the costs and benefits of its current strategies and explore alternative mechanisms for achieving sustainable development.

Key Points: Lessons from the Cedi’s Rise

1. Currency Strengthening Has Dual Implications

The cedi’s appreciation offers both advantages and risks. On one hand, it can enhance the value of exports and improve the standard of living. On the other hand, it may hurt export-oriented industries and reduce foreign exchange reserves.

2. Private Sector Challenges

The policies sustaining the cedi’s strength have limited credit availability for businesses, stifling growth and innovation. This is particularly damaging for SMEs, which rely on affordable financing to expand.

3. Environmental and Social Risks

The government’s focus on currency stability has overlooked the environmental toll of illegal mining. This neglect threatens water resources, biodiversity, and public health, creating long-term challenges for Ghana’s development.

4. The Need for Policy Diversification

Bokpin advocates for a multifaceted approach to economic management. This includes diversifying revenue sources, investing in sustainable industries, and addressing structural issues in the supply chain.

Practical Advice: Strategies for Sustainable Currency Management

Diversify the Economy

Ghana should reduce its overreliance on a single commodity (gold) by investing in sectors such as agriculture, technology, and renewable energy. A diversified economy is more resilient to external shocks and less vulnerable to currency fluctuations.

Promote Financial Inclusion

The government should prioritize initiatives that expand access to credit for businesses and individuals. This could involve streamlining loan processes, reducing interest rates, and supporting microfinance institutions.

Strengthen Regulatory Frameworks

Enforcing stricter regulations on illegal mining and environmental practices is essential. This would not only protect natural resources but also ensure that the cedi’s value is tied to sustainable economic practices.

Encourage Local Content Development

By supporting local industries and reducing dependency on imports, Ghana can create a more balanced trade environment. This includes investing in manufacturing, technology, and services to boost domestic production.

Points of Caution: Risks of Overcorrection

Economic Instability

Overcorrecting the cedi’s value could lead to currency devaluation, inflation, and loss of investor confidence. Policymakers must avoid abrupt policy shifts that destabilize the financial system.

Social Unrest

If the cedi’s strength leads to higher costs of living, it could trigger public dissatisfaction and protests. The government must ensure that economic policies do not disproportionately affect vulnerable populations.

Long-Term Sustainability

Short-term gains from currency strengthening may come at the expense of long-term growth. Policymakers should prioritize investments in education, infrastructure, and innovation to build a resilient economy.

Comparison: Lessons from Other Emerging Economies

While the article does not provide direct comparisons, several emerging economies have faced similar challenges with currency stabilization. For example, countries like Nigeria and South Africa have historically struggled with maintaining stable exchange rates while fostering private sector growth. These nations often employ a mix of monetary policies, trade agreements, and environmental regulations to balance their economic goals. Ghana could draw lessons from these experiences, adapting strategies that align with its unique economic context.

Legal Implications: The Role of Regulatory Frameworks

Although the original article does not explicitly address legal implications, it is worth noting that the Bank of Ghana’s actions must comply with national and international financial regulations. For instance, the Central Bank’s interventions must adhere to the guidelines set by the Bank of International Settlements (BIS) and the International Monetary Fund (IMF). Additionally, environmental policies must align with Ghana’s commitments under the United Nations Sustainable Development Goals (SDGs) and the African Union’s Agenda 2063.

Conclusion: Toward a Sustainable Economic Future

The aggressive strengthening of the cedi presents a complex challenge for Ghana. While it may offer short-term benefits, the risks of undermining private sector growth, environmental sustainability, and long-term economic resilience cannot be ignored. Professor Bokpin’s warnings serve as a critical reminder that currency management must be part of a broader strategy for inclusive and sustainable development. By adopting policies that balance stability with growth, Ghana can navigate the challenges of its current situation and build a more equitable and resilient economy.

FAQ: Frequently Asked Questions

What is the current state of the Ghanaian cedi?

The cedi has recently appreciated against the U.S. dollar, with a 5% increase on the interbank market in late October 2025. This is the first such significant movement since the third quarter of 2025.

Why is Professor Bokpin concerned about the cedi’s strengthening?

Bokpin warns that the cedi’s rapid strengthening is harming private industry competitiveness, reducing credit availability, and exacerbating environmental issues like illegal mining. He argues that the policies driving this trend are unsustainable.

How does the cedi’s strength affect Ghana’s economy?

A stronger cedi makes exports more expensive, reduces foreign exchange reserves, and limits access to credit for businesses. This can hinder economic growth and job creation.

What are the environmental concerns linked to the cedi’s appreciation?

The focus on currency stability has diverted attention from addressing illegal mining, which threatens water bodies and ecosystems. Bokpin highlights the need to address this issue to prevent long-term environmental damage.

What steps can Ghana take to balance currency stability and growth?

Ghana should diversify its economy, promote financial inclusion, enforce environmental regulations, and invest in sustainable industries. These measures can help mitigate the risks associated with an overly strong cedi.

Sources:

– Joy FM’s Newsnight, October 16, 2025, featuring Professor Godfred Bokpin.
– Data from major commercial banks on the cedi’s interbank exchange rate (October 6–10, 2025).
– Multimedia Group Limited disclaimer, October 2025.

References:

1. Bokpin, G. (2025). Interview on Joy FM’s Newsnight.
2. Ghana Bank of Ghana, Interbank Market Data (2025).
3. United Nations Sustainable Development Goals (SDGs) Report, 2025.
4. African Union Agenda 2063: Accelerating Economic and Social Transformation.

This rewrite maintains the original article’s core message while expanding on critical points, ensuring clarity, and adhering to SEO best practices. The structure and content are designed to inform readers about the complexities of currency stabilization and its broader implications for Ghana’s economy.