Accra, Ghana – In a surprising turn of events, the Ghanaian Cedi has experienced a notable appreciation against major international currencies in recent months, a stark contrast to its previous struggles with depreciation. This unexpected strength has prompted widespread discussion and debate among economists and the general public alike. At the heart of this discussion is Dr. Zakari Mumuni, First Deputy Governor of the Bank of Ghana (BoG), who has emerged as a key figure in explaining this phenomenon.

“The recent appreciation of the cedi is no fluke,” Dr. Mumuni stated, emphasizing the significance of the BoG’s actions. He argues that the current state of **Cedi stability** is not a matter of chance but a direct result of carefully considered and consistently applied policy measures implemented by the Bank of Ghana. This article delves into the policies and perspectives that Dr. Mumuni champions, offering insight into the factors contributing to the newfound strength of Ghana’s currency.

The Cedi’s performance has indeed been remarkable. Since the beginning of the year, it has appreciated by 12.2%, a significant rebound from the 13% depreciation it experienced during the same period last year. This reversal of fortune has raised questions about the underlying drivers of this change, with some attributing it to external factors. However, Dr. Mumuni insists that domestic factors play a more crucial role in the Cedi’s performance. “You will see that the domestic factors really have more weight in this case, in this performance, than the external factors,” he asserted during an appearance on PM Express Business Edition. The Bank of Ghana attributes this success to policy interventions targeting inflation and liquidity.

Controversial Policies Driving Cedi Stability

The Bank of Ghana’s pursuit of **Cedi stability** has not been without controversy. Some of the measures implemented have faced criticism from various quarters, including business associations and economic analysts.

One such measure is the increase in the policy rate. “We raised the policy rate. A lot of people, including GUTA, came after us… But we knew exactly what we were doing,” Dr. Mumuni explained. The decision to raise the policy rate, while intended to combat inflation, was met with resistance due to concerns about its potential impact on borrowing costs and economic activity. The Bank of Ghana believes that higher rates help curb inflation by making borrowing more expensive, thereby reducing spending and demand in the economy.

Another key policy has been aggressive liquidity sterilization through open market operations. “We’ve been very, very strong on liquidity sterilisation… This is really helping a lot to take out cedis from the system,” Dr. Mumuni stated. By actively managing the amount of Cedi in circulation, the BoG aims to prevent excess liquidity from fueling inflation and weakening the currency. Adjusting banks’ cash reserve ratios further contributes to sterilizing Cedi liquidity. “This has already sterilised some cedi liquidity in the system. That’s part of what is feeding into this stability.”

The Bank of Ghana’s Strategy for Disinflation

The overarching goal of the Bank of Ghana’s policies has been to re-engineer the disinflation process. “We lifted or tightened monetary policy for one reason — to make sure we re-engineer the disinflation process,” Dr. Mumuni explained. By implementing a tight monetary policy, the BoG aims to curb inflation and create a more stable economic environment.

Open market operations play a crucial role in this strategy. By buying or selling government securities, the BoG can influence the amount of money circulating in the economy. This, in turn, affects interest rates and inflation. While these policies may not always be popular, the Bank of Ghana remains focused on their necessity. “It wasn’t popular. But we stayed focused. And now the numbers speak for themselves,” Dr. Mumuni said.

In conclusion, the recent appreciation of the Ghanaian Cedi can be attributed to the Bank of Ghana’s deliberate and disciplined policies, including raising the policy rate and controlling liquidity through open market operations. Dr. Mumuni’s defense of these policies underscores the BoG’s confidence in its strategy and its positive impact on the Ghanaian economy. These measures are seen as essential for achieving long-term **Cedi stability** and fostering sustainable economic growth.