Cedi depreciation: 'BoG's illegal money to government chasing the dollar' – Adongo

The Member of Parliament for Bolgatanga Central, Isaac Adongo, has attributed the cedi's continual depreciation against the dollar to what he describes as illegal injections of Ghana cedis into the economy by the Bank of Ghana. Mr. Adongo alleged that the problem is a result of the Bank of Ghana's defiance and disregard for the laws with respect to budget funding by the Central Bank. "The key strand of Ghana's inflationary targeting framework is what we call fiscal dominance over monetary policy. What this means is that the Bank of Ghana should be restrained from giving money to the government to finance the budget. That is why its law stipulates that they cannot give more than 5% of government's previous year's revenue at any point in time in cumulative lending," he explained. "Last year, 2021, they ended the year with 35 billion Ghana cedis, and as we speak today, they are heading toward the same 35 billion, which would bring it to 70 billion. When you do that, there are two things that happen. One is that monies that you have pumped into the economy, the cedi in the economy, is what is chasing the dollar now," Mr. Adongo told Starr News He continued: "If you have over 70 billion of monies that do not belong to the economy, in the economy and chasing the dollar, the dollar would definitely collapse the cedi. That is caused by the Bank of Ghana itself. Two, when you do that, then you need to mop up the excess liquidity; you need to find a way to get that money back into the banking sector and probably back to the Bank of Ghana. In doing so, you must continuously increase the policy rate. Now, in the end, it is the businessman who gets hurt because he must be able to find a business that can give him 35% of returns of margins to pay the interest and even leave something to survive on." According to Mr. Adongo, the Central Bank's action has therefore resulted in an increase in interest rates and the cost of doing business.

The Member of Parliament for Bolgatanga Central, Isaac Adongo, has attributed the cedi's continual depreciation against the dollar to what he describes as illegal injections of Ghana cedis into the economy by the Bank of Ghana. Mr. Adongo alleged that the problem is a result of the Bank of Ghana's defiance and disregard for the laws with respect to budget funding by the Central Bank. "The key strand of Ghana's inflationary targeting framework is what we call fiscal dominance over monetary policy. What this means is that the Bank of Ghana should be restrained from giving money to the government to finance the budget. That is why its law stipulates that they cannot give more than 5% of government's previous year's revenue at any point in time in cumulative lending," he explained. "Last year, 2021, they ended the year with 35 billion Ghana cedis, and as we speak today, they are heading toward the same 35 billion, which would bring it to 70 billion. When you do that, there are two things that happen. One is that monies that you have pumped into the economy, the cedi in the economy, is what is chasing the dollar now," Mr. Adongo told Starr News He continued: "If you have over 70 billion of monies that do not belong to the economy, in the economy and chasing the dollar, the dollar would definitely collapse the cedi. That is caused by the Bank of Ghana itself. Two, when you do that, then you need to mop up the excess liquidity; you need to find a way to get that money back into the banking sector and probably back to the Bank of Ghana. In doing so, you must continuously increase the policy rate. Now, in the end, it is the businessman who gets hurt because he must be able to find a business that can give him 35% of returns of margins to pay the interest and even leave something to survive on." According to Mr. Adongo, the Central Bank's action has therefore resulted in an increase in interest rates and the cost of doing business.