Hi Gabby Asare Otchere-Darko,
Low prices of the country’s export commodities including cocoa, gold and oil contributed to plunging of the cedi between 2012 and 2014. The situation affected the country’s earnings from exports and reduced government’s capacity to finance imports, thereby exerting pressure on our foreign exchange reserves.
Cocoa and gold prices saw a decline of about 20 percent from 2011. In 2013, Ghana lost $1.3 billion potential exports revenue due to price decline on those two major products.
The Ghanaian economy was hit hard by the decline in cocoa and gold prices that began in 2011. Before the shock, projections were for continued robust economic growth, in line with the average growth rate experienced between 2009/11. However, in the wake of the cocoa and gold shock, growth slowed sharply and the cedi started plummeting and the economy experienced contradiction in 2013/14. The unexpected decline in cocoa and gold price explains only part of this downward surprise. World oil price also dropped sharply. The administration could not weather the shock because all our experts were affected and it was global. The administration redeployed resources across sectors in response to the shock and invested heavily across the sectors including the investments in the oil and gas sectors.
The budget proposals for these years were fashioned to counteract the effects of adverse developments on the international scenes. To make up for the shortfall in government revenue from exports, the rates of taxation were reasonably revised. To strengthen our revenue collecting agencies and instill discipline in the economy we went for the IMF facility.
Prior to the shock, the world bank in its report noted that Ghana’s earning from the exports of gold and cocoa will drop substantially. They based its prediction on the huge fall in prices of the two commodities. The Bank of Ghana had to draw down on its holdings foreign exchange to meet the gaps.
In spite of all the these. Challenges and curbing measures, the Mahama administration invested heavily in the power sector adding over 4000 megawatts of power to what it inherited, the Atuabo Gas project, the ENI/Vitol Sankofa US$7 billion investment. Atuabo gas alone saves between 400 and Ghc500 million in fuel importation annually.
Gabby the cedi plummeted between 2013/15 because our the fortunes of our precarious external sector hanged in the balance as we looked up to price and production rallies in our two traditional exports -cocoa and gold to improve our foreign currency revenue and shore up the dwindling value of the cedi against the major currencies.
Prices of cocoa, gold and oil started increasing from 2017. Government revenue from our exports including gold, cocoa and oil has increased significantly as a result of quadrupling of prices of our exports unprecedented in the history of the country. Government is spending less on power,gas and fuel because of the huge investment the Mahama administration made in these sectors. Most of the factors largely responsible for setting off a steep depreciation of the cedi were strategically cleared by the Mahama administration so why this downward movement of the cedi.
In spite of all these challenges, incomes of cocoa farmers were not undermined. Government paid their bonuses and increased producer price. Government also distributed fertilizer, insecticides, weedicides and seedlings to the farmers. Government gave financial support to the poultry industry and some pharmaceutical companies.
So, the question to Gabby is, why this backward movement with all these legacies. We did not go to the IMF because we had lost control over the economy. It was not the first time Ghana was going to the IMF. In fact, an NPP administration declared Ghana HIPIC, got all the HIPIC benefits and assistance, devalued our currency but worsened the health our economy before exiting office in 2009. I am struggling here to understand why Gabby and his cousins are celebrating the slight push of the cedi as a result of the $800 million. Ghanaians want to know what the administration has done with the over Ghc 100 billion borrowed so far.
Source: Ohenenana Obonti Krow