Stabilising the cedi: Boost local industries, expand exports — Prof. Quartey to govt
An economist Professor Peter Quartey says the only way the cedi can stabilise against the dollar is through the growing of indigenous Ghanaian businesses and the expansion of the country’s export of goods and services.
He affirmed that very little could be done with the depreciating value of the cedi as the first quarter of the year sees massive repatriation of dollars from the country.
“In the first quarter there is intense pressure on the dollar; we have developed an economy where we have a lot of foreign interest; we have a lot of foreigners who own businesses in Ghana; after December 31, when they declare their profit, they want to repatriate their profits.”
Prof. Quartey cited large multinational companies and the Chinese living in the country who usually demand dollars to go for their annual Chinese new year as the worst culprits who deplete the country’s dollar reserves.
He added that the situation this year could have been worse if not for the inflow from the International Monetary Fund (IMF) loan, cocoa syndicated loan and the World Bank loan.
Cedi’s consistent depreciation
Despite the inflow of the second tranche of the $600 million under the Extended Credit Facility from the IMF, the $300 million World Bank loan and $800 million cocoa syndicated loan, the cedi continues to depreciate, albeit at a slower pace, against the United States greenback.
The cedi lost 0.7% of its value to the dollar in January alone according to the Bank of Ghana.
Research firm, IC Research, predicts that the Ghana cedi will lose about 8.4% of its value to the US dollar in the retail market in 2024.
However current trend analysis and projections by financial analysts have predicted a non-single digit depreciation this year.
In late December last year, Cocobod received an amount of $600 million dollars out of $800 million from the cocoa syndicated loan.
This was followed by the $600 million dollar IMF loan and the $300 million dollar World Bank loan to support the country’s failing economy.
Negotiations with external creditors
Professor Quartey who is also Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, believes that any further lull in negotiations with the country’s external creditors will be a factor in the cedi’s consistent loss of value.
“We have finished one with our bilateral creditors but the others, we haven’t concluded but once we conclude all of that, the investors will have more confidence in the economy once again and we will see more dollar inflows which will stabilise the cedi,” he stated.
He, however, stressed that the country must focus on growing local businesses and export more goods to stem the tide in the depreciation of the cedi.
“The long term strategy is for us to expand our exports, once we expand our exports by adding value to it, and grow our indigenous businesses, while cutting down on our imports, the currency will be stabilised,” he noted.