Re-Emergence Of Black Market Is A Consequence Of Failed Policies – Bawumia

The Vice-Presidential Candidate of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia has stated that the re-emergence of a vibrant foreign exchange “black market” is a consequence of weird and counterproductive policy measures being instituted by the current managers of the economy to address the free fall of the Ghanaian cedi.

Dr. Bawumia stated this at a brief media interaction on arrival in Kumasi on Wednesday afternoon.

The NPP Running Mate said that the policies of the Central bank which had led to the re-emergence of the black market was a reversal of policies undertaken by various governments in over 25 years which saw “black market” transactions move into the Forex Bureaus and the Banks and a build-up of confidence in the local Ghanaian banking sector.

The former Deputy Governor of the Bank of Ghana in accessing the situation with the Ghanaian currency, which is at an 18 year low and is the worst performing currency at the moment on the African continent, said “so far the measures taken to arrest the depreciation has generally been counterproductive. Depreciation happens when for example you have too much cedis for example is chasing too few dollars; so in responding to the situation what you do is to decrease the pressure on the dollar and thus reduce the demand for the dollar but what is happening in the current policy response is very weird economic thinking.

What the Central Bank is doing is that they are trying to reduce the supply of dollars in the system as a policy response to exchange depreciation by virtually imposing taxes on keeping dollars. Though they have denied it, what cannot be denied is that as a result of the policies of the Central Bank, it is becoming more expensive to have dollars in your bank account” he indicated.

Dr. Bawumia said that the situation where Ghanaians and other nationals who had dollars in their accounts were told that there are no dollars when they go to their banks is a major problem in economic policy management as it reduces confidence in the banking system.

“It is a contract, if I put in dollars, I expect dollars so if am denied, next time I won’t put my dollars in a bank” he reiterated.

The former Deputy Governor of the Bank of Ghana, indicated that when banks refuse to give customers the dollars they have deposited, it amounts to forced conversion and a confiscation of dollar deposits and that those incidents inevitably undermined confidence in the banking system.

Touching on the records of the NPP and the NDC, Dr. Bawumia said “in the eight year administration of the NPP during which we organized two successful General elections and during which we were faced with a severe global economic crisis which saw oil for example rise to 147 dollars per barrel, the cedi cumulatively fell by just about 50%; in eight years.

However, the NDC administration which is yet to organize a single general election and which has had very favourable economic conditions such as the rise in commodity prices like Gold, Cocoa and also with the production of oil, has supervised an 80% depreciation of the Ghanaian currency. The difference is very clear” he added.

The NPP Running Mate noted that for him, what was more worrying was the inability of the government to do an appropriate diagnosis of the problem. He said that without an adequate and appropriate diagnosis, the policy solutions would be as well, inconsistent and ad-hoc as was being noticed currently.

Dr. Bawumia cited a variety of reasons for the rapid depreciation of the cedi.

These reasons according to the renowned economist include the Central Bank’s continuous and high financing of the government’s borrowing which he described as hugely problematic. He said while the West African Monetary Zone had as its criteria a less than 10% financing of government borrowing by Central banks, in Ghana currently, about 21 – 27% of governments borrowing is being financed by the Bank of Ghana. This, he sadi, had put unnecessary pressure on the county’s reserves and contributed significantly to the depreciation of the cedi.