Bawumia's FX analysis is 'so wack' – Adongo

Hiding behind Vice-President Dr Mahamudu Bawumia’s eloquence and confidence is empty economic analysis, opposition lawmaker Isaac Adongo has observed.

According to him, Dr Bawumia’s economic analysis concerning the exchange rate regime is so off the mark that he must go back to the classroom for a refresher course.

Speaking at a forum organised by the Coalition for Restoration on the theme: ‘Assessing the three-year reign of President Akufo—Addo’, the Bolgatanga Central MP said: “You recall that when he [Dr Bawumia] calculated depreciation and the cedi depreciated by 243 per cent, Dr Mahamudu Bawumia was roaming at the Mallata market with the same currency buying tomatoes and onions for Samira. In fact, worst of all, he still went to use that same thing to go and calculate inflation”.

“You, see, Dr Mahamudu Bawumia thinks that depreciation has the same dynamics as inflation, so, in his view, exchange rate depreciation is a goal variable, so, ‘You must have a medium-term depreciation figure’, just like we have a medium-term inflation target of 8 per cent, plus or minus two, which expired in 2018.

“That is why when they are reading the budget, they will tell you that inflation is expected to end the year at nine-point-something per cent; they don’t tell you that the exchange rate is expected to end the year at seven per cent because exchange rate depreciation is not a goal variable.

“Dr Mahamudu Bawumia, you are forcing us to engage in a debate of ignorance and we don’t want to be doing that. We want to be discussing and debating technical and intellectual arguments. So, when you invite us to debate your ignorance, you are wasting everybody’s time”, Mr Adongo said.

According to him, “One of the most important tools available to every country is your exchange rate; the reason is that, the factors that impact your exchange rate are often more external than the economy; that is why when he says that the fundamentals and all of that, everybody is laughing because when your exports are not coming, it’s not the fundamentals; when investors decide that there are better opportunities in another country and, therefore, they are exiting your market and selling your bonds and looking for the dollars and the dollars don’t exist; when demand exceeds supply, what happens? The exchange rate will collapse. Is that fundamental? So, the factors are more exogenous and that is why the exchange rate is seen as a shock absorber for managing the volatility of a country.

“And, therefore, depending on the volatility that a country faces, a double-digit depreciation may be the appropriate depreciation and, therefore, Dr Mahamudu Bawumia should not box Ghana into debating single-digit depreciation. That is not what depreciation is about, it is a major tool for managing external shocks and external volatilities.

“Unfortunately, this government has not yet experienced any external shocks and external volatilities and yet the cedi is struggling. If they experience a quarter of what we experienced in 2014 and 2015, I’m sure they’ll run away and tell us to come and take the governance”, Mr Adongo noted.

Continuing, Mr Adongo said: “When we dealt with this matter, he [Dr Bawumia] run away and this time, he did nominal value comparison; so, the cedi to the dollar was 1.18 in 2008 when Kufuor was leaving office and after eight years, we moved it to how much, is it 4.2, and, therefore, we have added about 3 dollars? What kind of analysis is that? Has he ever taught anybody this in the classroom?"

"They must unlearn everything because, you see, exchange rate depreciation is not the absence of changes in the exchange rate. When you use nominal values, what you’re simply saying is that the exchange rate should’ve remained constant but stability in the market says that the prices can increase but they must increase at an acceptable and stable rate. Dr Mahamudu Bawumia, I think you need a refresher course”.

He added: “Dr Mahamudu Bawumia, you see, your understanding of exchange rate dynamic is so wack that I shudder when you are getting closer to the Great Hall [of the Kwame Nkrumah University of Science and Technology].

“The truth is that, every economist or anybody managing an economy, least of all the head of the economic management team, is looking at the trajectory of the exchange rate movement to get worried or to be happy. So, when the exchange rate moves from 9.6 in 2016 to 4.8, you’re excited and you want to maintain it or improve it; unless there are external factors, unfortunately, there are no external factors; then it goes to 8.8, almost doubling, now it is 13 per cent, instead of coming to tell the people of Ghana something reasonable to have confidence and some sense, you’re saying that we should use your good performance to compensate for your poor pass.

“Ladies and gentlemen, the people of Ghana have voted for eloquence and sheer confidence; behind that eloquence and confidence is empty economic analysis”, Mr Adongo asserted.