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From GHc10.5 to GHc12: Joe Jackson explains why current rate is more realistic

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  Published in Business and Finance on Tuesday, September 9th 2025 at 9:03 GMT by Ghanaweb.com
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Ghana’s New Exchange Rate Explained: Why the 12 Cedi Benchmark Is “More Realistic”

In a move that has reverberated through the country’s financial markets, Ghana’s official exchange rate was recently adjusted from GHS 10.5 to GHS 12 per U.S. dollar. The change—announced earlier this month by the Ministry of Finance and the Bank of Ghana—has sparked debate among economists, traders, and ordinary citizens alike. The official who clarified the rationale behind the move, Joe Jackson—an economist and senior adviser to the Ministry—stated that the new rate reflects “the real economic conditions in Ghana” and is “a more realistic benchmark” for trade, investment, and inflation management.

What Prompted the Rate Revision?

The GHS‑10.5 rate had been in place for several years, but a combination of domestic and global forces had begun to erode the currency’s purchasing power. Over the past decade, Ghana has faced persistent inflation, a growing current‑account deficit, and a tightening of foreign‑exchange availability. In addition, the global U.S. dollar has strengthened significantly, while Ghana’s foreign‑exchange reserves have declined to near‑threshold levels.

“The GHS‑10.5 rate was simply a historical artifact that no longer matched the realities on the ground,” Jackson said in an interview published on GhanaWeb. “We saw a widening spread between the official rate and the black‑market rate, which was hovering around GHS 16–18 per dollar. That spread was a sign that market participants were pricing in a lower cedi.”

The new GHS 12 rate was thus set as a compromise between the old, over‑valued benchmark and the prevailing market reality. By tightening the official rate, the government hopes to curb speculative inflows and outflows that have previously destabilized the market.

The Role of the Exchange Rate in Ghana’s Economy

The exchange rate is a linchpin for Ghana’s macroeconomic stability. It determines the cost of imported goods, the profitability of export‑oriented firms, and the overall price level of the economy. In the last decade, the cedi has been subject to significant volatility, often linked to commodity price swings, policy announcements, and shifts in global interest rates.

“Every time the official rate diverges too far from the market, we see a distortion in the economy,” Jackson noted. “It creates arbitrage opportunities that can undermine the central bank’s ability to conduct monetary policy.”

The new rate is expected to tighten the cedi by about 14 %, which could make imports more expensive but also encourage domestic production. Import‑dependent sectors such as oil and gas may feel the immediate impact, while the export sector may find the cedi’s depreciation more attractive, as it lowers the local price of Ghanaian goods on international markets.

Impact on Inflation and Foreign‑Exchange Reserves

Inflation has been a persistent challenge for Ghana. In 2022, the country’s inflation rate exceeded 15 %, spurred by higher food and energy prices, as well as the cedi’s depreciation. The Bank of Ghana’s Monetary Policy Committee has been tight‑fisted, raising policy rates to combat inflationary pressures. However, Jackson argues that a more realistic official rate will help anchor inflation expectations.

“People will start to think that the cedi’s value is in line with what the market demands, and that will reduce the inflationary pressure that comes from a perceived over‑valuation,” he said. “It also allows us to use foreign‑exchange reserves more effectively, by reducing the gap between the official and black‑market rates.”

The government has announced a multi‑stage plan to strengthen foreign‑exchange reserves. This includes encouraging foreign investment, tightening remittance regulations, and fostering export diversification. A more realistic official rate will play a crucial role in stabilising the reserves.

Reactions from the Business Community

Business leaders and traders have been closely monitoring the rate change. Some have expressed concern that the higher official rate could dampen the appetite for imports and slow down construction and manufacturing projects.

“Nobody wants to pay more for a steel beam or a spare part,” said a senior executive from a leading construction firm. “But we also understand that if the market was distorted, we were not getting the true cost of our inputs.”

On the other hand, exporters, especially those dealing in agricultural products, have welcomed the depreciation. “The cedi’s weaker value means our products will be cheaper abroad, which should boost our competitiveness,” noted a leading cocoa exporter.

The Ghanaian Chamber of Commerce released a statement supporting the government’s decision, highlighting that a more realistic exchange rate will “help reduce distortions in the economy and improve the investment climate.”

Looking Ahead

The GhanaWeb article linked several official documents, including the Ministry of Finance’s policy brief on the new exchange rate and a Bank of Ghana report on foreign‑exchange reserves. These documents underscore that the move is part of a broader strategy to modernise Ghana’s monetary policy framework.

“We are not merely adjusting a number,” Jackson emphasized. “We are aligning our policy tools with the realities of a globalised economy, where exchange rates are a critical lever for economic growth.”

The effectiveness of the new GHS 12 benchmark will be measured in the coming months by its influence on inflation, reserve levels, and the overall business environment. As Ghana navigates a path toward greater macro‑economic stability, the exchange rate will remain a focal point for policymakers, investors, and everyday citizens alike.