In its fourth review under the Extended Credit Facility (ECF) arrangement with Ghana, the Executive Board of the IMF expressed concern over the government's forex strategy, instead of allowing market forces to dictate the exchange rate.

“The Bank of Ghana should maintain an appropriately tight monetary stance until inflation returns to its target, reduce its footprint in the foreign exchange market, and allow for greater exchange rate flexibility, including by adopting a formal internal FX intervention policy framework,” the IMF stated in its review.

In a statement signed by its Executive Director, Professor Isaac Boadi, who also serves as the Dean of the Faculty of Accounting and Finance at the University of Professional Studies, Accra (UPSA), the IERPP noted that it had previously cautioned the government on the same issue, but its advice was ignored.

“These warnings from the IMF do not just validate but vindicate what the Institute for Economic Research and Policy Promotion (IERPP) has consistently cautioned against,” the statement read.

The Institute recalled its earlier warnings that “the government was deliberately injecting large amounts of dollars into the system to prop up the Cedi’s value.”

“While this may make the currency look stable in the short term, it distorts market dynamics, encourages cheap imports, and hurts local production — a toxic combination for long-term economic health,” it added.

The IERPP further criticised the central bank for lacking a transparent and formal FX intervention policy. “To date, the Bank of Ghana has not adopted a clear, published FX intervention framework. Its market operations remain ad hoc and opaque, leading to uncertainty and speculation. Instead of allowing the exchange rate to reflect actual market forces, the BoG has continued aggressive dollar sales, particularly during sensitive periods.”

According to the Institute, this short-term tactic has only served to mask deeper structural problems in the economy, exactly the scenario both the IMF and the IERPP had warned against.

“Despite these aligned warnings, the actions taken by the BoG and the government show a clear disregard for both the IMF and IERPP’s advice,” the statement concluded.

Advised but unmoved: The IERPP, and BoG’s policy disconnect

The IMF offered sound advice, IERPP gave a political warning, perhaps that’s exactly why BoG and the government chose not to listen to IERPP.

July 7, 2025, IMF Executive Board Completes the Fourth Review under the Extended Credit Facility Arrangement with Ghana. In paragraph 17, IMF states:

“The Bank of Ghana should maintain an appropriately tight monetary stance until inflation returns to its target, reduce its footprint in the foreign exchange market, and allow for greater exchange rate flexibility, including by adopting a formal internal FX intervention policy framework.”

The IMF urged the Bank of Ghana (BoG) to do three critical things:

"The Bank of Ghana should maintain an appropriately tight monetary stance until inflation returns to its target..."

Keep interest rates high enough to bring inflation back to the Bank's official target. Easing too soon could allow inflation to spiral again.

"...reduce its footprint in the foreign exchange market..."

The BoG should stop frequently selling U.S. dollars in the market just to stabilize the cedi. Constant intervention distorts market signals and can drain precious reserves.

"...and allow for greater exchange rate flexibility..."

The Bank should allow the cedi to move more freely in response to supply and demand, rather than trying to fix or heavily manage its value. 

"...including by adopting a formal internal FX intervention policy framework."

The Bank of Ghana should have a clear, rules-based policy for when and how it intervenes in the FX market, rather than acting unpredictably. 

These warning from IMF did not validate but vindicates what the Institute for Economic, Research and Policy Promotion (IERPP) echoed the same concerns. Their message was blunt:

“The cedi’s strength is artificial.”

IERPP claimed the government was deliberately injecting large amounts of dollars into the system to prop up the cedi’s value. While this may make the currency look stable in the short term, it distorts market dynamics, encourages cheap imports, and hurts local production — a toxic combination for long-term economic health. To date, BoG has not adopted a clear, published FX intervention framework. Its market operations remain ad hoc and opaque, leading to uncertainty and speculation. Instead of allowing the exchange rate to reflect actual market forces, the BoG continued aggressive dollar sales, particularly during sensitive periods. This short-term tactic masked deeper economic issues, exactly what both institutions cautioned against. Despite these aligned warnings, the actions taken by the BoG and government show a clear disregard for both the IMF and IERPP advice:

Author:

Prof. Isaac Boadi

Dean, Faculty of Accounting and Finance, UPSA

Executive Director, Institute of Economic and Research Policy, IERPP