Business News of 2014-02-07

Editorial -virtual nose dive of the cedi

In the wake of the virtual nose dive of the cedi, the Bank of Ghana last week released $20 million to meet the pressing demands of some sectors of the economy. Some observers of the money market said the amount was almost insignificant and the cedi has throughout the week, continued inching toward GHc 2.500 to the dollar

There are probably those who giggled at the recent suggestion by National Democratic Congress Communication Team member, Mr. Abraham Amaliba, that high rise buildings are responsible for the fall of the cedi.

Mr Amaliba was no doubt talking about the phenomenal and massive infrastructural development that has gone on in Ghana in the past decade: The hundreds of sky-bound, high rise buildings comprise top grade hotels, new office complexes, upmarket apartments, supermarkets etc.

The colossal quantities of material and equipment needed for these projects have had to be imported. This issue is probably more complex than many in the money market may perceive because the massive development of infrastructure has resulted from a near dramatic growth in the economy:

Ghana is one of the fastest-growing economies in the world today. This growth in the economy requires a corresponding expansion in economic infrastructure and that means importing more equipment and materials with dollars to build the requisite infrastructure. That leads to a scarcity of dollars and a depreciation of the cedi.

In 2012 and last year, oil companies, telecom companies and manufacturing industries went into a dollar buying frenzy, lapping up all available dollars for the importation of raw materials and equipment and sending the cedi into a nose dive.

Then of course, there are there are the huge numbers of retail supermarkets and commercial businesses who know no other word than “import.”
Show us at the General Telegraph, a single consumer item which is not imported with the dollars and we shall show you a straight, clear path out of our predicament with the falling value of the national currency.

Some experts have also said the moment some businesses and enterprises sense an emerging depreciation of the cedi, they engage in panic buying and hoarding of the dollar, making it more and more scarce and expensive. We think the preceding issues are those that need to be considered in the search for a solution.

A typical response of the Bank of Ghana to the fall of the cedi has always been to pump some dollars into the economy as it did last week. This has always proven to be short term emergency measure and not a long term solution.

The General Telegraph believes that the solution to the problem of the falling value of the cedi against major foreign currencies is to pay much greater attention to the production of what we need locally, limit imports to the very barest minimum and then increase our exports.

That way, we shall earn lots of dollars which then become more readily available and less expensive while our cedi appreciates progressively on a sustained basis.




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