The Governor of the Bank of Ghana, Dr. Johnson Asiama, has revealed that the recent sharp appreciation of the Ghanaian cedi has led to a significant decline in remittance inflows. He noted a near 50% drop, attributing it to a behavioral shift among Ghanaians living abroad, many of whom have paused sending money home for development projects. The currency’s strength, while seen as a sign of economic progress, is also having unintended consequences on diaspora funding.
According to Dr. Asiama, the cedi has gained over 40% against the US dollar, 31% against the British pound, and 24% against the euro. This strong appreciation is supported by falling inflation, improved macroeconomic stability, and robust external reserves. While this development has boosted investor confidence and indicates a more stable economy, it appears to be disincentivizing remittances due to perceived lower value in local currency conversion.
Speaking at the launch of the Bank of Ghana Chair in Finance and Economics at the University of Ghana, Dr. Asiama emphasized that many Ghanaians abroad are misinterpreting the implications of the stronger cedi. He expressed concern that people who previously supported construction and other projects in Ghana have halted funding, believing that their money now has less impact locally.
He argued, however, that this logic may be flawed. With inflation decreasing, the cost of materials like cement should also be adjusting downwards, balancing the effects of currency appreciation. As a result, the Governor suggested that the overall impact on project costs should be minimal, and remittances should continue despite exchange rate movements.
To address the issue, Dr. Asiama proposed a proactive approach—organizing roadshows in top remittance-originating countries to educate Ghanaians abroad. The aim would be to clarify the macroeconomic realities and encourage continued support for local projects, regardless of currency fluctuations. He stressed the need to maintain these critical financial inflows which support not only families but also national development.
Source: citi newsroom