Economists prescribe antidote to cedi’s woes
Some economists are impressing upon government, the need to do more in addressing the fundamental weaknesses in the economy – such as increasing production in agriculture and industry among others.
This according to them is the only way the perennial challenges with the cedi can be effectively addressed.
The cedi recently recorded an impressive appreciation following the Bank of Ghana’s dollar injection into the market from time to time. It has however started declining in value in the last few days.
During a panel discussion on the economy organized by research organization Good Governance Africa – West Africa Centre, participating economists generally maintained the way out is for government to focus on the economic fundamentals.
Economist and Head of Finance at the University of Ghana Business School, Dr. Godfred Bokpin told JOY BUSINESS what is happening to the cedi is simply a reflection of the fundamentals of the economy.
“It is not the case that the Cedi is misbehaving on its own. The Cedi is as strong as the foundation which is the economy and with the economy we are talking about agriculture, industry and service. So when you have these sub-sectors doing well, the Cedi will be able to have the necessary support in order to maintain its strength against the major trading currencies because when the Cedi interacts with the other major trading currencies what is backing the currency becomes very important,” he pointed out.
For him, instead of the Bank of Ghana being asked to stabilize the Cedi, the focus should be on the fundamentals of the economy. He indicated that when the fundamentals of the economy are put right, the Cedi will necessarily provide good feedback.
Dr. Bokpin stated that he does not personally subscribe to the assertion that the Central Bank is entirely to blame for the Cedis’ depreciation.
“No, it has to be an integrated approach where we involve all the sectors that are related to the economy like the Ministry of Food and Agriculture, the Ministry of Trade and Industry, Ministry of Finance, etc to address the issues with the currency.”
The Managing Director of the Institute of Statistical, Social and Economic Research at the University of Ghana, Prof. Felix Ankomah Asante who also told JOY BUSINESS that there are serious issues with the Ghana Cedis vis-à-vis the major trading currencies saying, which he said is a major concern, especially for businesses.
Confidence in the currency for him, is key because it is the catalyst for confidence in the business sector.
“If you in a country and within a week your currency moves from 4.2 to a US Dollar to 2.9 then you should be asking some serious questions as to what could be driving that kind of appreciation. Ask yourself what this currency appreciation is backed by. We are not producing anything,” he exclaimed.
Prof. Ankomah Asante expressed worry saying, the real sectors of the economy – agriculture, industry and services are not supporting the currency so hence the attempt to inject more dollars into the economy to control the depreciating Cedi.
He however asked “how long can you do this? Yes we have been told there are expected inflows of Dollars and so on but what are the dollars being generated in the country to hold the currency?”
He indicated that the discussions about how the Cedi could be stabilized should be elevated from what the expected monies from the cocoa syndicated loans, IMF monies and so on could do for the currency since that would not sustain the currency.
He is advocating what he calls ‘locally-generated dollars’ to back the currency. “The link between agriculture and industry is very crucial but in Ghana, that link is not seen. Every year we see a lot of excess production in food commodities while at the same time we see industry unable to mop up those excesses.”
Prof. Ankomah Asante wants Ghana to institute a system such that industry and the manufacturing sectors can mop up the excesses from agriculture.