Ghana’s economy has been experiencing instability in the first two months of this year, mainly as a result of the weakening local currency, the Ghana cedi. Having depreciated at about 17 per cent in 2013, the Ghana cedi took an early nose dive this year and has depreciated by four per cent since January.
This has alarmed the market as traders, particularly, those who deal in imported products, have suddenly found out that their capital can no longer finance the volume of their previous purchases.
Manufacturers who use imported inputs had to revise their rates upwards to meet the rising cost of international currencies, such as the United States dollar.
Unfortunately, these are all happening amid a general price build up in the economy visited by hiked utility tariffs, petroleum prices and the Value Added Tax rate; the cedi instability being the last straw to break the camel’s back.
The central bank, Bank of Ghana, has outlined a number of short-term measures to contain the declining value of the cedi. (Refer to cover story). The ultimate aim is to discourage the holding of the dollar, either in cash or in bank accounts for local transactions.
All foreign exchange bank accounts are expected to be converted to Ghana cedis. This means that all bank accounts would now be in the local currency. Since banks are required to trade foreign exchange held with them within a period of a month, they will have access to more foreign exchange to sell to businesses and individuals who genuinely need them for transactions abroad; not for hoarding.
The central bank expects that the measures will increase foreign exchange supplies and return confidence in the cedi as the only medium of exchange for local transactions.
The Ministry of Finance has hailed the measures, in spite of widespread skepticism by individuals, rating agencies and independent private sector economic analysts.
However well-intentioned, the GRAPHIC BUSINESS maintains that the tactful implementation and enforcement of the measures that are pursuant to the Foreign Exchange Act 2006, Act 723, are germane to their success.
The bane of this country has always been the inefficient enforcement of laws. The laws are considered as though they are meant for a category of citizens. As evident, public opinion does not support a hostile enforcement, where men in clothes would be seen harassing and manhandling people for trading in currency or holding one in a 21st Century Ghana.
The GRAPHIC BUSINESS believes that the way forward is be tactful, professional and firm to instil discipline and compel compliance in institutions such as the banking sector. But as this happens, the government machinery should endeavour to deliver those vital projects, implement appropriate policy actions, as well as ensure prudent and prioritised spending to stabilise the economy.
The paper is looking up to the Bank of Ghana and the Ministry of Finance to get their acts together and create a Ghana where citizens and visitors can have absolute confidence in the cedi and be free to hold and use it for every domestic transaction.
