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Fitch Solutions has issued a warning that a significant drop in global gold prices—possibly triggered by a shift toward more conventional U.S. trade policies or the resolution of major geopolitical tensions—could pose serious risks to Ghana’s international reserves.
In its latest economic outlook, the UK-based research firm cautioned that such a decline in gold prices would strain the Bank of Ghana’s ability to maintain the cedi’s stability, potentially triggering 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 stated, outlining it as a key downside risk.
Upside Potential
On the upside, Fitch noted that a continued appreciation of the cedi could lead to a faster-than-expected decline in inflation. This would, in turn, boost private consumption and allow the Bank of Ghana to ease monetary policy sooner, stimulating credit growth and economic activity.
Fiscal Policy and Government Spending
The report also projected a negative contribution from government consumption in 2025, attributing it to Ghana’s ongoing fiscal consolidation efforts under its International Monetary Fund (IMF) programme.
Fitch explained that the government’s drive to reduce spending and rein in deficits will limit public sector-driven economic activity in the near term.
Private Consumption Outlook
Despite the expected pullback in government spending, Fitch remains optimistic about private consumption. The firm indicated that elevated gold prices, coupled with a stronger exchange rate, are likely to ease inflationary pressures, reduce the cost of living, and support household spending in the quarters ahead.
The balance of these risks, Fitch concluded, will largely depend on external shocks, commodity price trends, and the Bank of Ghana’s monetary policy stance in response to domestic inflation and currency movements.
