Adnan Adams Mohammed
The Ghana Cedi which always suffer bullying by the major international trading currencies, has depreciated close to 13% since December against the US Dollar and currently sells at about GHC5.56 to the Dollar. This has infuriated the Ghanaian public to challenge the government to immediately look for solution to halt the sharp decline, particularly when prior to the election in 2016 and shortly after, Vice President Bawumia and other government spokespersons touted their competence in managing and improving the fortunes of the currency.
But, Dr. Priscilla Twumasi, a lecturer at University of Ghana believes that, the most effective measure to permanently address this problem is to work at being a productive economy that exports more than it imports.
“The emphasis should be on how we are expanding our export base. Are we adding value to our domestic produce so that we produce domestic substitutes for goods that are imported? But so far as we don’t tackle those critical issues, they will continue to be cyclical; today the pressure comes and we ease it. But the bottom line is that the dollar is not for us, and the central bank does not have unlimited reserves. Whatever it is, the BoG will run out of reserves – and when that happens, you will have to allow your currency to depreciate,” she said.
Meanwhile, the former finance minister suggested that it is time for sober reflection by all stakeholders. “I think it is time for sobering reflection by everybody because the Cedi was subject to intense debate and discussion during the last election and I don’t want to go over this, together with issues like, I will not borrow when I come to office, together with issues like, we can arrest the Cedi, we know the fundamentals, so I think it is time for sobering reflections by all of us. It is good you have gone back and I think one of the lessons from going back is that there aren’t same set of issues, some will be similar some will be same but the economic situation differs from one time to the other but I think comparing the headlines is good,” he explained.
“It is time to focus on the issues collectively and look at the solutions. What solutions can be short term and what solutions over time will increase the supply of foreign currency because it is a question of people wanting the Dollars to pay for imports and that is the demand side, and there are the cocoa farmers, the miners and others who are boosting the supply.”
The Cedi under the former Finance Minister’s watch in 2014 depreciated by about 33% and 22% in 2015. This resulted in the release of forex into the economy by the Central Bank and issuance of “Home Grown Policies” and also the IMF deal.
Comparing the situation of the Cedi decline during his tenure and what the nation is experiencing now, Seth Terkper was baffled that the currency is experiencing such fall despite the amount of forex available to the government.
He said between 2017 and 2018, the government has had pumped close to 200% more foreign exchange into the economy largely due to Oil prices and Cocoa prices.
On the back of this, he is convinced there is more to the current situation than is being speculated and has called for more open discourse about the matter to identify the challenges and institute appropriate measures.
The Former Finance Minister recounted, “From the end of 2015, 2016 when we had this crisis, when the prices went down output went down. The supply of foreign exchange from Oil was $500 million. Today, we are making about $1.8 billion from crude oil alone to compliment cocoa. That is why I mentioned the period. What is it that may be going on that we may not know? Considering that if you compare the period now from back then, there is more supply into the economy, so what is it that is not working?”
His call for broad discussions about the declining currency comes at a time when renowned economist, Dr Nii Moi Thompson has made similar proposal arguing that no single government has the brains to solve the currency and economic challenges of the country.