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It is no longer news that the Cedi has depreciated in recent weeks. This is the widest gap between the free market value and the Central Bank of Ghana’s rate in Ghana’s history. Implementation of bad economic policies coupled with a constant extreme outflow of foreign exchange had severely induced depreciation of the Cedi value. Candidate Akufo-Addo and his Vice, Dr Bawumia during the 2016 election campaign, made the point of making the Cedi equal to the dollar. In opposition, the current president and his Vice deliberately ignored the sacred fact that due to the unbalance of import to export goods, the demand for dollar is always on the rise which generally causes continued depreciation of the cedi.
Dr Bawumia knows that depreciation is steadfast at the parallel market and the gap between Cedi’s value at the parallel and official market widens due to this imbalance. To checkmate this, some past administrations devalued the cedi a number of times, only for the same thing to happen years later. This trend has continued since the 70s.
This administration’s lack of definite economic direction makes the country look unstable to outsiders, disrupting foreign investors and investments. The Akufo-Addo government did not meet same harsh economic situation Mahama inherited. Mahama’s firm decision to end the power crisis and also focus on infrastructural development exerted pressure on the cedi. Government needed more foreign exchange crude oil, gas etc. Bad transportation networks, bad telecommunications system, inadequate power supply, bad health system etc make it hard for goods to be produced in Ghana. As a result Ghanaians turn to other countries to get stuff that aren’t easily available here.
To end this negative trend, the Mahama administration reduced significantly, the infrastructure deficit. The administration completed the Atuabo gas project which saves the country Ghc 500 million annually. Thousands of megawatts of power was added to the stock he [Mahama] inherited making Ghana the power hub Mahama targeted. The Cedi did not suffer the bruises we witnessing today under Akufo-Addo. The administration’s infrastructural development agenda did not affect the cedi’s stability. The administration also gave financial support to some private companies to enable them increase production and also create space for more employment.
Construction of the cocoa roads and rehabilitation of old cocoa roads, free fertilizer distribution, free cocoa seedlings distribution etc all exerted pressure on the cedi but the Mahama administration successfully protected the cedi from external bruises. The Mahama administration reformed and transformed the telecommunication industry culminating in the benefit government getting from the sector. The sector has become on of the most reliable source of revenue generation because of policies and projects implemented by the Manama administration.
Those old Bretton wood institutions prescriptions for curing currency depreciation including currency devaluation, reckless collapsing of banks, injection of foreign currencies etc have never given nations permanent solution to their currency crisis and deteriorating economies. In fact, these prescriptions were exactly the same Bretton wood institutions’ arguments, and their Ghanaian supporters, in defence of the structural adjustment programme in the early 80s. Lending credence to this argument was IMF czar, Christiane Largarde, who in early 2012 justified her position on devaluation in some West African States with this argument
We were spoon fed with this argument in elementary and intermediate economics classes,yet it still appears to make a lot of sense. When will this child grow up? If President Akufo-Addo is serious about strengthening the position of the cedi against, say the dollar, his government must make deliberate policies to diversify the economy, increased its productive base through youth entrepreneurship, innovation and stimulate demand for domestically made goods.
Solution to this problem is not cheap political rhetoric and bogus political projections. The Mahama administration encouraged and invested heavily in local Rice Production. Demand for locally produced rice has increased because of the support the administration gave the sector.
President Mahama personally ensured that most of our road contracts went to our local contractors. Prices of our exports including gold, cocoa and oil dropped heavily on the global market. The Mahama administration did not pass that external pressure on Ghanaians. Through implementation of prudent measures the administration was able to absorb all the associated pressures. The NDC administration established the heritage and stabilization funds, the Exim Bank etc all in support of the cedi’s stabilization agenda. Some state agencies were granted permission to borrow on their own strength and pay back themselves. All these measures greatly reduced pressure on our reserves and the cedi.
Those adhoc steroid measures this administration intermittently introduce to check the cedi’s movement are not what the economy needs. High recurrent expenditure, implementation of populist policies (consumptive policies), weak revenue generation system, reckless borrowing by this administration undermine all remedial measures.
To understand the current movement, we must find out why the world bank and other renowned financial institutions predicted significant growth in the Ghanaian economy in 2017/18 in 2016. The world bank said its projection of 8+percent growth between 2017 and 2018 was based on investments the Mahama administration made in the oil and gas industry and other critical policies it implemented between 2014 and 2016. The cedi was rated the second most stable currency in the Sub Region, inflation began dropping sharply before the NPP took over and Ghana was rated the best place for doing business in West Africa because of the indicators enumerated above.
Source: Ohenenana Obonti Krow