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Stop This Ignorance- The Governor Of BOG

Tue, 24 Sep 2013 Source: Baidoo, Philip Kobina

On the 2nd of this month, ghanaweb carried a piece culled from the Independent news paper entitled 'Cedi, 5th worst currency in Africa'. Though, l was not surprised to read the eye catching headline, however, I was curious due to my ultra interest in the performance of the national currency. It went further to detail that the cedi had so far lost 12.9% of its value against the dollar from the start of the year. And the most frightening piece of information supplied by the paper was that the cedi depreciated by 0.7% against the dollar within a week to that report. To extrapolate by simple calculation, while holding the trend constant, it means by the end of the year the cedi would have lost almost a third of its value against the dollar. All this decay has taken place irrespective of the extraordinary financial engineering by the governor of Bank of Ghana to stop the downward slide with the selling of bonds to mop out the excess liquidity fuelling the depreciation. This is the performance of a currency that the governor of Bank of Ghana, Dr Henry Kofi Wampah, is ranting that he will be forcing Ghanaians on the threat of prosecution to use as a legal tender.




It is a fact that there are two tear currency economies in the country – the dollar and the cedi. It is very frustrating if you are the governor to be confronted by such an affront to one's authority. I feel your pain Mr Governor, but I am a realist; I don't indulge in fantasies. The fact that the government issues a currency does not mean that the people will use it. Inflation in Russia during the 90s rendered the Russian ruble so worthless some Russians even used it as wall paper. Was the currency printed for that purpose? No, but they did use it as a wall paper as well as toilet paper, which was also in short supply. That is what became of the ruble, and the Russians used it as such. It is the responsibility of the government to protect the integrity of its currency by making sure that it not inflated. Now, what will the governor do if the citizens decides to trade by barter, or for example, use schnapps as a medium of exchange if that is what they repose their trust. You cannot force the people to use the national currency when they do not trust its integrity. If you want a classic lesson on this shabby, stupid and myopic policy study the history of the assignat during the French Revolution when a bunch of hooligans led by Robespierre decreed capital punishment for anyone who does not accept the then worthless currency due to over printing by the authorities.





With the current trend, which adds extra cost to business; it is an idea that will not be entertained by any shrewd businessman. Therefore, the question Dr Wampah needs to ask is: why is it that some Ghanaians will go to that length by not accepting their own legal tender? And the reason is what I have given in the preamble to this piece. The ignorance of Ghanaian policy makers and leaders is that they think the individual businessman runs his enterprise for the interest of the Ghanaian economy. It is not from the benevolence of the baker, observed Adam Smith in his wise Scots manner, that we expects our daily bread, but from his self interest in baking and selling it. It is in the same measure that the Ghanaian businessman conducts his business. It is the government that should manage the economy in the interest of its citizens. And once the government adopts policies that work against the interest of the citizens they will reciprocate by adopting practices that will protect themselves against the systematic indirect stealing of their hard earned money. The government cannot inflate the currency and expect no reaction.





The root cause of the problem, which they do not want to accept, is the wasteful and ravenous government expenditure that far outstrips its receipts. The most glaring indicators are the ballooning national and international debt. Quite a few of the media houses, especially the electronic ones are doing a good job of constantly updating the public on this suicidal path. You would assume that our people in authority will take heed. But what answer did they give us at the beginning of the year. They had decided by the middle of last year to add 45 new MPs to the legislature, and they made true to their word – the only promise they never fail when it comes to wasteful expenditure.




The annual salary of a single MP is more in excess than their constituency development fund. Whether their constituencies receive the fund is another food for thought. The cost of maintaining a single MP is not cheap even based on Ghanaian standards. The government struggles constantly to plug the holes in her fiscal current accounts obligations, and persistently resort to the money market to meet her budgetary needs. The intense competition for the limited cash flow within the economy is what drives up the cost of money; a phenomenon which in itself is a lethal blow to economic growth. To add an additional superfluous burden of 45 new MPs when inherently the government will have to borrow to meet its obligation to the fresh MPs is insane





We already have 275 member Parliament, which cost the country a fortune to maintain just for them to make unintelligible noise. A third of their cost can be engaged productively to improve the strength of the national currency. To shout from the roof tops that our leaders are out of touch to the fundamental developmental needs of the people is an understatement. I will like to make one salient point. While some of us are contemplating on the idea raised earlier, the former president Kufuor who should know better is advocating for a second chamber. And this is coming from a person who studied economics at one of the most prestigious universities in the world – Oxford. Of course, we want to perfect our democracy, but we have to work within the framework of the resources available. Not to worry, perhaps, he would like to finance it from his own pocket.





From 1992 till when the new Ghana cedi was issued, the national currency lost 96% of its value. And from 2008 up to date the new cedi has so far depreciated by 54%. Now, though the dollar also depreciates with time, however, you will not be totally wiped out like it has with the cedi if you should keep your liquid assets in dollars. So Dr Wampah don’t even think about it. Advice your pay masters to clean and disinfect their smelling house rather than poking your nose into the way Ghanaians protect themselves against our irresponsible leaders. You will do well not to add unnecessary cost and burden to the judiciary by prosecuting businessmen who are just acting naturally against blatant theft from the government.







Philip Kobina Baidoo Jnr


London


Baidoo_philip@yahoo.co.uk

Columnist: Baidoo, Philip Kobina