BoG’s FX intervention: A necessary response

In its recent post-program review of Ghana’s economic performance, the International Monetary Fund (IMF) recommended that the Bank of Ghana (BoG) reduce its footprint in the foreign exchange market and allow for greater exchange rate flexibility.

It also urged the adoption of a formal FX intervention framework to guide future operations and enhance transparency.

While such recommendations align with the IMF’s long-standing preference for flexible exchange rate regimes, they risk misreading the Ghanaian context and underestimating how crucial BoG’s strategic interventions have been in restoring stability, rebuilding reserves, and reversing the trajectory of a fragile economy emerging from crisis.

The Bank of Ghana is not impeding market reform. On the contrary, it is enabling a successful transition. The gains recorded in 2025 are not the product of laissez-faire orthodoxy. They are the result of deliberate, well-calibrated policy action rooted in legal authority, market realities, and institutional reform.

A Legal and Institutional Mandate, Not Policy Adventurism

The Bank of Ghana’s engagement in the FX market is not discretionary, it is enshrined in law. Under Section 4(c) of the Bank of Ghana Act, 2002 (Act 612), the Bank is mandated to “promote and maintain the stability of the currency of Ghana.” This is complemented by Section 30, which empowers the Bank to manage Ghana’s international reserves, and Section 34, which designates it as the regulator and supervisor of the foreign exchange market.

The Foreign Exchange Act, 2006 (Act 723) further reinforces this framework. It places BoG at the centre of Ghana’s foreign exchange regime, with responsibility for licensing, monitoring, and ensuring the repatriation of foreign exchange earnings within 30 days.

These provisions reflect a recognition that in a small, import-dependent economy like Ghana, external sector discipline is vital to macroeconomic stability.

BoG’s interventions, therefore, are not a policy indulgence. They are a constitutional responsibility.

Market-Based Interventions with Tangible Results

Contrary to the perception that FX interventions distort market signals, BoG’s actions have served to anchor expectations and protect market integrity. In a market still recovering from a sovereign debt crisis, interventions have helped manage volatility, reduce panic buying, and enable more accurate pricing of the cedi. The results speak for themselves.

Between January and June 2025, Ghana recorded its strongest external performance in recent history. The trade balance surged to a surplus of US$4.14 billion, up from just US$759 million over the same period in 2024. This was driven largely by a 60.5% rise in exports, notably gold and cocoa, while imports grew only modestly. As a result, the current account balance improved dramatically, posting a US$2.12 billion surplus in Q1 2025 compared to just US$66 million a year earlier.

These developments underpinned a robust buildup of gross international reserves, which climbed to US$11.1 billion by June 2025, equivalent to 4.8 months of import cover, up from US$8.98 billion at the end of 2024. Simultaneously, the Ghana cedi appreciated by 42.6% in the first half of the year, reversing a 19.2% depreciation in 2024.

Such strong macroeconomic outcomes could not have been achieved without a steady, confident hand in the FX market. These were not the effects of passive liberalization but of active, coordinated policy.

Coordinated Policy

The appreciation of the cedi and the buildup of reserves were not driven by FX intervention alone. They reflect broader reforms, tight monetary policy, fiscal consolidation, improved foreign investor confidence, and robust remittance inflows. Renewed export earnings from cocoa and gold also played a vital role, alongside targeted initiatives like the Gold for Reserves programme.

FX intervention, in this context, acted as a stabilizer and signal, ensuring that these underlying gains were not eroded by speculation or disorderly market behaviour. Interventions helped reinforce discipline in forex repatriation, supported confidence among importers and exporters, and facilitated the pricing of risk by investors returning to the Ghanaian bond and equity markets.

Global Precedents Validate BoG’s Approach

Ghana’s FX intervention strategy is not unusual. Around the world, central banks actively manage their exchange rates to promote macroeconomic stability.

In India, the Reserve Bank intervenes regularly to prevent excessive rupee volatility while maintaining a flexible inflation-targeting framework. Japan’s Ministry of Finance stepped into currency markets in 2022 to halt a rapid yen depreciation. Switzerland’s central bank has historically intervened heavily to prevent franc overvaluation, and Brazil continues to use FX derivatives and swaps to cushion market shocks.

These countries are not labelled interventionist for acting in times of stress, they are recognized for acting prudently in their national interest. Ghana deserves no less.

Reform Is Underway

The IMF’s suggestion that the BoG scale down its interventions overlooks the reforms the Bank is already implementing. Ghana now operates a competitive FX auction mechanism, discloses intervention volumes more transparently, and is developing a formal FX intervention framework in consultation with international partners.

But the FX market is still structurally thin, and macroeconomic recovery is fragile. Premature withdrawal could reverse the cedi’s gains, undermine confidence, and reignite inflationary pressures. BoG’s strategy has been one of balance, not suppressing flexibility, but sequencing it appropriately in line with market capacity.

Conclusion

The IMF’s guidance, while grounded in sound economic theory, must reflect the practical realities of Ghana’s recovery. The Bank of Ghana’s FX operations are not an obstacle to reform but a foundation for it. They are legally mandated, technically sound, and demonstrably effective.

At a time when Ghana’s macroeconomic turnaround is gaining momentum, calls to roll back what is clearly working must be treated with caution. Ghana is building reserves, stabilizing the cedi, and restoring investor confidence, not in spite of BoG’s actions, but because of them.

In this light, the IMF’s recommendations must be adapted, not abandoned, but implemented at a pace and sequence that preserves Ghana’s hard-won gains. The BoG’s role in the FX market is not excessive. It is essential.

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