Adnan Adams Mohammed
A research institute has attributed the hiking foreign exchange rates and persistent inflation to high cost of doing business, increasing labor agitation and corruption.
In its assessment of midyear budget review, the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana admitted that, the cedi has experienced significant depreciation against major foreign currencies.
The Institute therefore wants the government through the Bank of Ghana to reinforce monetary policies and control measure to strengthen the local currency, Cedi.
“.. the central bank should increase its presence in the exchange rate market,” ISSER admonished.
Data from BoG indicates that, in the first half of 2024, the cedi depreciated by 18.6 percent against the US Dollar, 17.9 percent against the Pound Sterling, and 16.0 percent against the Euro.
The cedi recorded a depreciation of 27.8% against the U.S Dollar, 31.9 % against the Pound, and 30.3 % against the Euro in 2023. Also, a 30.0 % depreciation against the Dollar, 21.2 % against the Pound, and 25.3 % against the Euro in 2022.
“This suggests some stabilization of the exchange rate over the past three years,” the report stated.
However, the cedi was generally more volatile against major foreign currencies in the first half of 2024 compared to the same period last year.
Despite this volatility, the cumulative depreciation rates were relatively lower, but ISSER urged the government to take additional measures to curb the cedi’s depreciation.
The report recommended that the government reduce the rate of cedi depreciation, boost exports to lessen foreign exchange demand, and enforce stricter forex regulations.
On inflation, the Institute noted that June 2024 inflation had decreased to 22.8 %, a significant drop from the peak of 54.6 % in December 2022.
Despite this reduction, the figure remains high compared to the 12.6 % inflation rate in December 2021.
ISSER urged the government to address the commodities driving inflation and consider improving infrastructure in key food-producing areas to reduce transportation and fuel costs.
“For instance, enhancing the road network in areas designated as the food basket of Ghana and reducing foreign exchange rates can help lower transportation and fuel costs, subsequently reducing both food and non-food inflation to single digits,” the report concluded.
