Cedi Was Best‑Performing Foreign Money in Africa in the First Eight Months of 2025 – World Bank – Life Pulse Daily

Introduction

The October 2025 edition of the World Bank’s Africa Pulse Report placed the Ghanaian cedi at the top of the continent’s currency performance chart for the first eight months of the year. With a year‑to‑date (YTD) gain of roughly 20 % against the U.S. dollar, the cedi outperformed every other African monetary unit, including the Zambian kwacha, which posted a 16 % appreciation.

This article unpacks the data behind the cedi’s surge, explains the macro‑economic factors that drove it, and offers practical guidance for investors, businesses, and policy makers who track foreign‑exchange (FX) trends in Africa.

Analysis

Key figures from the World Bank report

• YTD appreciation (Jan – Aug 2025): +20 % vs. the U.S. dollar.
• Peak appreciation (July 2025): +40.5 % YTD, before a modest pull‑back.
• September 2025 exchange rate (inter‑bank): GH₵ 12.15 per US $1.
• Retail market rate (September 2025): approximately GH₵ 13.60 per US $1.
• Comparative performance: Zambian kwacha +16 %; South Sudanese pound and Ethiopian birr each fell more than 10 %.

Why the cedi outperformed

Three inter‑related forces are identified by the World Bank as the primary drivers of the cedi’s robust performance:

1. Tight fiscal and monetary stance: The Ghanaian government adhered to a disciplined budget, reducing fiscal deficits to below 5 % of GDP. Simultaneously, the Bank of Ghana maintained a relatively high policy rate (13 % as of August 2025) to curb inflationary pressures.
2. Rising export earnings: Cocoa, gold, and oil exports grew by an average of 8 % YoY, generating additional foreign‑exchange inflows that supported the cedi.
3. Improved market sentiment: Investor confidence rose after the successful implementation of a structural‑reform package announced in March 2025, which included reforms to the public‑private partnership (PPP) framework and the removal of several non‑tariff barriers.

Contrasting trends in other African currencies

While Ghana’s macro‑policy environment proved supportive, several neighbouring economies faced headwinds:

• South Sudan: Persistent fiscal deficits, a reliance on oil revenue, and political instability led the South Sudanese pound to lose more than 12 % YTD.
• Ethiopia: The birr suffered a 10‑plus‑percent decline due to widening current‑account deficits and a surge in public‑sector borrowing.
• Zambia: The kwacha’s 16 % gain reflected a combination of better debt‑service performance and a modest rebound in copper prices, yet it lagged behind Ghana’s pace.

Summary

According to the World Bank’s October 2025 Africa Pulse Report, the Ghana cedi posted the strongest YTD performance among African currencies, gaining roughly 20 % against the U.S. dollar. The appreciation was underpinned by disciplined fiscal policy, rising export revenues, and positive investor sentiment. In contrast, the South Sudanese pound and Ethiopian birr weakened by more than 10 % during the same period, while the Zambian kwacha recorded a respectable but smaller gain of 16 %.

Key Points

Practical Advice

For Investors and Traders

1. Monitor policy‑rate decisions: The Bank of Ghana’s policy rate remains a leading indicator of short‑term cedi movements. A rate hike typically supports the currency, whereas a cut could trigger a pull‑back.
2. Track export‑related data: Quarterly reports on cocoa, gold, and oil shipments provide early signals of FX pressure.
3. Use forward contracts wisely: Given the cedi’s volatility—especially the 40 % surge followed by a 19 % correction—forward contracts can lock in favorable rates for importers.

For Ghanaian Businesses

• Re‑evaluate pricing strategies for imported inputs; a stronger cedi reduces import costs but may compress margins if competitors source locally.
• Consider hedging export revenues in foreign currency to protect against any future depreciation.
• Stay abreast of fiscal‑policy announcements, as changes to tax incentives or public‑spending plans can affect cash flow.

For Policy Makers

• Maintain fiscal discipline to preserve credibility with international investors.
• Continue diversifying export baskets to reduce dependence on a single commodity.
• Strengthen the foreign‑exchange market’s depth by encouraging more participation from institutional investors.

Points of Caution

Although the cedi’s performance is impressive, several risk factors could reverse the trend:

• External shocks: A sharp rise in global interest rates or a sudden drop in commodity prices could erode export earnings.
• Domestic political uncertainty: Election cycles or policy reversals may affect investor confidence.
• Debt sustainability: Ghana’s public‑debt-to‑GDP ratio remains above 70 %; any perceived unsustainability could trigger capital outflows.

Comparison

Legal Implications

Foreign‑exchange transactions in Ghana are governed by the Foreign Exchange Act, 2020 (Act 925). The Act requires:

• All FX contracts to be registered with the Bank of Ghana.
• Compliance with the “single‑rate” policy, which mandates that official rates be used for reporting and tax purposes.
• Penalties for unlicensed FX trading, including fines up to GH₵ 500,000 and possible imprisonment.

Companies that engage in hedging, forward contracts, or currency swaps must ensure that their counterparties are licensed and that all documentation is filed within the regulatory timelines. Failure to comply can result in enforcement actions that may impair a firm’s ability to operate in the Ghanaian market.

Conclusion

The Ghana cedi’s 20 % YTD appreciation makes it the standout performer among African currencies in the first eight months of 2025. The World Bank attributes this success to a combination of prudent fiscal management, growing export earnings, and renewed market confidence following structural reforms. While the outlook appears positive, external variables—such as commodity price volatility, global monetary‑policy shifts, and domestic political dynamics—remain potential sources of downside risk.

Stakeholders who understand the drivers behind the cedi’s strength and who adopt disciplined risk‑management practices will be best positioned to benefit from the current environment while safeguarding against future volatility.

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