## IMF Caution on Cedi Stability Vindicates IERPP's Warnings **News Title:** IMF’s caution to government on ‘artificial’ stability of cedi vindicates us - IERPP **Report Provider/Author:** GhanaWeb, citing the Institute for Economic Research and Policy Promotion (IERPP) and the International Monetary Fund (IMF). The IERPP statement was signed by Professor Isaac Boadi, Executive Director of IERPP and Dean of the Faculty of Accounting and Finance at UPSA. **Date/Time Period Covered:** The news references the IMF Executive Board's fourth review under the Extended Credit Facility Arrangement with Ghana, completed on **July 7, 2025**. The IERPP's statement was made in response to this review. **Key Findings and Conclusions:** * The **Institute for Economic Research and Policy Promotion (IERPP)** asserts that the International Monetary Fund's (IMF) recent caution to the Ghanaian government regarding its management of the cedi's stability vindicates the IERPP's own prior warnings. * The IMF, in its fourth review, expressed concern over the government's **direct foreign exchange interventions** to support the cedi, arguing that this approach hinders market forces from determining the currency's true value. * The IERPP accuses the government of **deliberately injecting large amounts of dollars** into the market to artificially prop up the cedi. This practice, according to the IERPP, creates an "illusion of short-term stability" but ultimately distorts market dynamics, encourages cheap imports, and undermines local production, posing a threat to long-term economic health. * Both the IERPP and the IMF have criticized the **Bank of Ghana (BoG)** for lacking a transparent foreign exchange intervention policy. The IERPP describes the BoG's market operations as "ad hoc and opaque," leading to uncertainty and speculation. * The IERPP concludes that the actions of the BoG and the government demonstrate a **"clear disregard"** for the advice provided by both the IMF and the IERPP. **Key Statistics and Metrics:** * No specific numerical statistics or financial metrics were provided in the excerpt regarding the cedi's performance or the volume of interventions. **Important Recommendations (from the IMF):** The IMF urged the Bank of Ghana (BoG) to undertake three critical actions: 1. **Maintain an appropriately tight monetary stance until inflation returns to its target:** This means keeping interest rates high enough to control inflation and prevent it from escalating again. 2. **Reduce its footprint in the foreign exchange market:** The BoG should decrease its frequent selling of U.S. dollars to stabilize the cedi, as continuous intervention distorts market signals and depletes foreign reserves. 3. **Allow for greater exchange rate flexibility:** The Bank should permit the cedi's value to fluctuate more freely based on supply and demand, rather than attempting to fix or heavily manage its exchange rate. 4. **Adopt a formal internal FX intervention policy framework:** The BoG needs to establish a clear, rules-based policy for when and how it intervenes in the foreign exchange market, moving away from unpredictable actions. **Significant Trends or Changes:** * The news highlights a **disconnect** between the advice offered by international financial institutions (IMF) and domestic policy think tanks (IERPP) and the actual policies implemented by the Bank of Ghana and the government concerning cedi management. * There is a perceived trend of the government prioritizing **short-term currency stability** through direct interventions, which the IERPP and IMF argue is detrimental to long-term economic health and market integrity. **Notable Risks or Concerns:** * **Artificial Cedi Stability:** The primary concern is that the cedi's perceived strength is not a reflection of genuine market forces but is artificially maintained through interventions. * **Distorted Market Dynamics:** Government interventions distort how the market functions, leading to inefficiencies. * **Encouragement of Cheap Imports:** An artificially strong currency makes imports cheaper, which can harm local industries. * **Undermining Local Production:** The combination of distorted markets and cheap imports negatively impacts domestic businesses and production. * **Lack of Transparency:** The opaque nature of the BoG's foreign exchange operations creates uncertainty and encourages speculation. * **Disregard for Expert Advice:** The government and BoG's alleged dismissal of warnings from both the IMF and IERPP raises concerns about their commitment to sound economic management. **Material Financial Data:** * No specific financial data, such as reserve levels, intervention amounts, or inflation targets, was provided in the excerpt. **Verbatim Quotes:** * "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." - **IMF** * "These warnings from the IMF do not merely validate, but vindicate the concerns that the Institute for Economic Research and Policy Promotion (IERPP) raised earlier." - **IERPP Statement** * "The cedi’s strength is artificial." - **IERPP** * "While this may create an illusion of short-term stability, it distorts market dynamics, encourages cheap imports, and undermines local production, a toxic combination for long-term economic health." - **IERPP** * "To date, the BoG has not adopted a clear, published FX intervention framework. Its market operations remain ad hoc and opaque, leading to uncertainty and speculation." - **IERPP** * "Despite these aligned warnings, the actions taken by the BoG and government show a clear disregard for the advice of both the IMF and IERPP." - **IERPP**
IMF’s caution to government on ‘artificial’ stability of cedi vindicates us - IERPP
Read original at GhanaWeb →The Institute for Economic Research and Policy Promotion (IERPP) says it has been vindicated by the International Monetary Fund’s (IMF) recent caution to the government over its management of the cedi’s stability.In its fourth review under the Extended Credit Facility Arrangement with Ghana, the IMF Executive Board expressed concern about the government’s continued support for the cedi through direct foreign exchange interventions, rather than allowing market forces to determine its value.
“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 a statement signed by its Executive Director, Professor Isaac Boadi, who also serves as Dean of the Faculty of Accounting and Finance at UPSA, the IERPP noted that it had previously issued similar warnings to the government, though those cautions went unheeded.“These warnings from the IMF do not merely validate, but vindicate the concerns that the Institute for Economic Research and Policy Promotion (IERPP) raised earlier,” the statement read.
The IERPP accused the government of deliberately injecting large amounts of dollars into the market to prop up the cedi’s value.“While this may create an illusion of short-term stability, it distorts market dynamics, encourages cheap imports, and undermines local production, a toxic combination for long-term economic health,” the Institute warned.
It further criticised the Bank of Ghana (BoG) for lacking a transparent foreign exchange intervention policy.“To date, the BoG has not adopted a clear, published FX intervention framework. Its market operations remain ad hoc and opaque, leading to uncertainty and speculation,” the statement said.“Instead of allowing the exchange rate to reflect actual market forces, the BoG has continued aggressive dollar sales, especially during politically sensitive periods.
This short-term approach masks deeper structural issues, exactly the kind of problem both the IMF and IERPP cautioned against.”The statement concluded, “Despite these aligned warnings, the actions taken by the BoG and government show a clear disregard for the advice of both the IMF and IERPP.”Read the IERPP’s full statement below:Advised but unmoved: The IERPP, and BoG’s policy disconnectThe 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 BoadiDean, Faculty of Accounting and Finance, UPSAExecutive Director, Institute of Economic and Research Policy, IERPPAMECheque Fraud EXPOSED: How it works and how to stay safe
