File photo of gold bars and cedi notes
Fitch Solutions has cautioned that a sharp decline in global gold prices could significantly erode Ghana’s international reserves and destabilise the cedi.
The UK-based research firm noted that such a scenario could be triggered by a return to more conventional trade policies in the United States or the resolution of major global geopolitical tensions.
According to Fitch, if gold prices were to fall sharply, the Bank of Ghana would struggle to maintain the cedi’s current stability, potentially leading to a renewed sell-off of the local currency.
“This would keep inflation elevated, lead to a weakening in consumer and investor sentiment, and prompt the central bank to keep interest rates higher for longer,” Fitch Solutions stated.
This development forms part of the firm’s downside risk outlook for Ghana in its recent report.
On the other hand, Fitch noted an upside scenario where a further appreciation of the cedi would help bring inflation down more quickly than currently projected.
The firm explained that this would boost private consumption and create room for the Bank of Ghana to ease its tight monetary policy stance, potentially stimulating credit uptake and supporting broader economic growth.
Fitch also projected that government consumption will contract in 2025, as the administration prioritises fiscal consolidation measures in line with Ghana’s International Monetary Fund (IMF) program.
This anticipated pullback in public spending could temper overall economic activity.
Despite the expected fiscal tightening, Fitch said private consumption is likely to strengthen, supported by a stable cedi and sustained high gold prices.
The firm concluded that a stronger exchange rate would ease inflationary pressures, improve household purchasing power, and support consumer spending in the near term.
MA
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