Ghana’s economy, like many others in Africa, is heavily reliant on imports, particularly gasoline, machinery, and industrial raw materials.
The country also has a sizable amount of foreign debt that must be serviced in foreign currencies. Over the last decade, the Ghanaian cedi has suffered significant devaluation versus international currencies, particularly the US dollar.
Several reasons, including trade imbalances, capital flight, and global commodity price volatility, have contributed to the country’s depreciation, reducing its foreign exchange reserves.
As of 2024, the exchange rate crisis had only worsened, with the cedi depreciating further.
The high exchange rate has boosted expenses for businesses and consumers alike, putting extra pressure on an economy that is already struggling.
This context sets the stage for understanding the numerous ways in which Ghana’s high exchange rate contributes to its economic issues.
Rising business costs
The high exchange rate raises the expense of conducting business in Ghana. Companies that rely on imported raw materials or machinery are obliged to pay more since the cedi is weaker. This is especially visible in industries such as manufacturing, where production costs have grown dramatically.
For example, a local furniture business that imports wood and machinery from abroad would suffer huge cost increases, forcing it to raise prices or absorb the costs, both of which are harmful.