BoG says 41% cedi appreciation reflects mean reversion, not overvaluation

The Bank of Ghana has defended the 41 percent appreciation of the cedi in 2025, describing it as a market correction driven by mean reversion rather than an overvaluation of the currency.

According to the central bank, the sharp strengthening of the cedi reflects an adjustment from previous levels of weakness rather than a deviation from economic fundamentals.

The Head of the Financial Markets Department at the Bank of Ghana, Gershon Kudjo Agbledzorwu, explained on TV3’s Key Points programme that the currency’s recovery was expected after years of steep depreciation.

“The appreciation of about 41% in 2025 was a correction, not overvaluation. The cedi lost about 77% between 2022 and 2024, so the correction was needed,” he stated.

Between 2022 and 2024, the Ghana cedi recorded a cumulative depreciation of about 77 percent against the US dollar. This period of sustained weakness contributed to Ghana’s debt challenges, including sovereign default, loss of Eurobond market access, and engagement with the International Monetary Fund (IMF).

Against this backdrop, the Bank of Ghana argues that the 2025 appreciation represents a reversal of earlier overshooting rather than a structural imbalance.

Mean reversion refers to the economic principle where an asset price that has deviated significantly from its long-term equilibrium tends to move back toward that level over time. The Bank of Ghana noted that international institutions, including the IMF, have acknowledged that the cedi’s 2025 performance aligns with this dynamic.

However, officials say the stronger currency has had mixed implications for policy programmes such as the Domestic Gold Purchase Programme (DGPP). While it has reduced the cedi cost of purchasing gold locally—supporting reserve accumulation—it has also widened valuation gaps between official and parallel market rates, contributing to higher programme costs in accounting terms.

The central bank maintains that these effects are temporary and should not overshadow the broader gains in macroeconomic stability.

Overall, Bank of Ghana officials say the cedi’s rebound reflects restored investor confidence and improving fundamentals, with the associated programme costs representing the price of necessary economic adjustment.