Businesses proffer solutions to escalating dollar rate
Adnan Adams Mohammed
Ghanaian businesses are ‘up in arms’ against the uncontrollable escalating depreciation of the local currency, the Cedi against the major trading currencies, especially the U.S dollar.
Currently, the Cedi is trading GHC7.15 to one U.S dollar on the forex market. This is up from about GHS 5.58 in the first quarter of 2021. The Cedi is ranked as the worst performing currency among 15 major currencies in Africa as the Cedi has depreciated 7.6 percent this year.
To this, the Ghana Union of Traders (GUTA) has called on regulators of the forex market to fast-track the proposal of making the Chinese Yuan as the only trading currency when doing business with China. They believe such a move will reduce pressure on the Cedi because imports will not be done with US dollars as most Ghana’s import currently come from China because of their cheaper products and cost.
“We can also do a similar clearing system with China where we send our local currency to the local banks, and they have a clearing system with the Chinese banks where they clear with the local currencies”, President of GUTA, Dr. Joseph Obeng, reacting to the current development explained the point that, Ghana could explore a clearing system with China similar to the Pan-African Payment and Settlement System.
“I think this is the way forward, and central banks in Africa have started thinking in that manner. I think they have to fast track those initiatives that will lessen the pressure on the US dollar,” Dr. Obeng said.
Apparently, the Association of Ghana Industries’s (AGI) President, Dr. Humphrey Ayim-Darke, thinks otherwise. He believes moves to reduce the import of finished goods will be in the best interest of the Cedi.
He blamed traders importing finished goods for contributing to the struggles of the cedi.
“They put pressure on the exchange rate because they demand it for finished products.”
Mr. Ayim-Darke was responding to a member of the Traders Advocacy Group, Irene Odoom, who had said Ghanaian industries contributed to the struggle of the cedi because they imported raw materials.
“Most of them don’t have the raw materials here in Ghana to do it,” Mrs. Odoom said on the show.
“The machines you use, some are obsolete and for the end product, the prices are high,” she added.
But Mr. Ayim-Darke retorted that the imports of industries still resulted in a net benefit to Ghana.
“By virtue of their [traders] deeds, bringing only finished products, if you look at the value chain of value addition, it is limited.”
“They don’t create enough jobs and the turnaround of their funds in the value chain is short. When you bring in raw materials, the value chain is longer,” he added.
Mr. Ayim-Darke noted further that this “affects the exchange rate in terms of the deficit the BoG [Bank of Ghana] needs to shore up the currency.”