Business News of 2014-02-05

Economist ties cedis' fall to state of forex regime

An Economist, Professor Peter Quartey, says one of the surest ways to arrest the Ghana Cedi’s free fall is by stabilising the economy.

The local currency has over the past months gone down by almost 4 per cent against the dollar, with analyst pegging its end of year depreciation at 17 per cent.

As part of the many proposals being put forward to correct the Cedi's current challenges, Professor Quartey told Joy News government must take the views of rating agencies very seriously.

Fitch Ratings in October cut Ghana’s credit assessment one level to B, five levels below investment grade, as the government failed to achieve its fiscal-deficit goal of 9 per cent of gross domestic product and overran on its spending on interest payments.

Standard & Poor’s and Moody’s Investors Service last month also lowered the outlook on their ratings to negative from stable, indicating a greater chance of a downgrade than an improvement in the rating.

"We shouldn't downplay these ratings because investors look at it and take action based on that", he cautioned. He also added that the current situation where anyone can go into a forex bureau and change money without a trace is a major factor in the Cedi's predicament.

The Bank of Ghana, according to him, should look at enforcing the current exchange laws and measures to help stabilize the Ghana cedi. Although the Central Bank is set to announce a set of measures on Thursday to help stabilize the local currency's value, the solution, according to Professor Quartey, is enforcement not new policies.

He also added that a long-term solution Ghana's foreign exchange challenges is to pursue production, which in turn would boost the manufacturing sector. "We have turned this country into a buying and selling economy…and until we change this, the situation would remain the same", he said.

Meanwhile, the Ghana Cedi, on Tuesday depreciated against the United States dollar and Euro on the interbank market but appreciated in value against the British pound.

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