The financial institution in a statement titled “Ghana Market Insight” and released on Monday, May 12 has beat down expectation for the Ghanaian cedi predicting it to end the year at 14 to a US dollar to ensure purchasing power parity that will keep exports competitive and attract more financial inflows. According to Absa Bank, the local currency has rallied too aggressively due to the surge in gold prices and the high world market price of cocoa that has translated to strong export receipts for the West African country. It noted that efforts by the Bank of Ghana in supplying hard currency to the interbank market have contributed to driving the exchange rate sharply lower from 15.50/$ a month ago.

The bank believes that Ghana’s export receipts “will continue to benefit from supportive gold and cocoa prices” despite expectation that cocoa will experience a “smaller harvest in the West Africa region” with a low output from Cote d’Ivoire, but Ghana could see a rebound in output this year after last year’s slump owing to the consistent rainfall levels recorded in the country. Gold, however, is likely to gain with the entry of new mines, including Cardinal-Namdini and Ahafo South mines, that are expected to commence production in 2025.

“The heightened uncertainty in global trade has also triggered
a flight to safe-haven assets such as gold, driving its price to all-time highs of cUSD3,300/bl in recent weeks. Given these developments, we now expect the current account surplus to improve to 5.1% of GDP in 2025 from last year’s 4.3%.”, the statement added

Absa Bank further noted that the Ghanaian cedi has rallied by 19% over the past month “fuelled by a combination of buoyant market confidence and increased FX support from the Bank of Ghana (BoG).” In its forecast for the rest of 2025, the bank acknowledged that the cedi would maintain momentum strengthening from last year’s average rate of 14.50/USD to a 14.16/USD.

“However, the current exchange rate of 13.05/USD seems
too strong. Our framework suggests that the Real Effective Exchange Rate (REER) has appreciated to its most stretched level in at least a decade. Relative to the historical average, we estimate that the REER is overvalued by 19%, implying a low degree of competitiveness. To achieve purchasing power parity (PPP) again, we believe the cedi would need to cede some gains and revert towards 14.00/USD by year-end.”, the statement said