Business News of 2014-03-26

BoG measures on cedi depreciation not working – Bawumia

The 2012 vice presidential candidate of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia has indicated that the Bank of Ghana’s (BoG) measures to save the depreciation of the cedi will not work.
He opined that dollarization is a “vote of no confidence in the local currency” and should therefore not be blamed for the depreciation of the cedi. According to him, the BoG’s directives “are retrogressive steps that have destroyed so much of the hard work on the foreign exchange market going back 30 years.”
The central bank in February this year announced certain measures to halt the free fall of the cedi by revising the rules governing the operations of Foreign Exchange Accounts (FEA) and Foreign Currency Accounts (FCA).
Banks were ordered not to grant a foreign currency denominated loan or foreign currency linked facility to a customer who is not a foreign exchange earner. All exporters were also urged to collect and repatriate in full, the proceeds of their exports to their local banks within 60 days of shipment.
But delivering a public lecture on “Restoring the Value of the Cedi” at the Central University College in Accra, the former Deputy Governor of the BoG mentioned that since the central bank started the implementation of the new policy to curb dollarization, “the cedi has depreciated an additional 6.4%.”
He maintained that the directives “are not working; in fact, they will not work” and blamed the weakened fundamentals of Ghana’s economy as being the sole cause of the depreciation of the Ghana cedi.
Dr. Bawumia listed “slower growth, large fiscal and current deficits, rising inflation, rising inflation, rising interest rates, rising debt levels and low levels of international reserves” as being the cause of the loss of confidence by investors which has also caused the “downgrading of Ghana’s sovereign credit rating agencies.”
Dr. Bawumia urged government to admit that the economy is in crisis “so that it can carry the country along and get public support for the tough remedial measures it may have to take. The denial must therefore stop.”
He added that “government must resist the temptation to make new promises and commitments of expenditure for new programmes.”
He therefore called for the restoration of fiscal discipline, checking of revenue leakages, expansion of tax net and effective tackling of corruption among others to save the economy.
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