Ghana’s Deputy Minister for Finance, Dr. Stephen Amoah, has attributed the persistent depreciation of the Ghanaian cedi to the country’s import-driven economy, describing it as a “ritual problem” that requires national attention beyond the capacity of any single government.
The Root of the Issue
Speaking to the media on Wednesday, Dr. Amoah emphasized that the high demand for foreign currency, driven by substantial import levels, continues to exert pressure on the cedi. He clarified that the issue of cedi depreciation is longstanding and not attributable to any particular administration. “Cedi depreciation is a ritual problem, I agree with you. It’s not because of one particular government,” Dr. Amoah stated. He criticized those blaming the New Patriotic Party (NPP) government, calling for a more nationalistic approach to the problem.
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Proposed Solutions
Dr. Amoah assured that if elected, Vice President Dr. Mahamudu Bawumia plans to develop a long-term framework to address the cedi’s depreciation. “As long as we remain an import-driven economy, we will face challenges with the cedi. But Inshallah, Alhaji Dr. Mahamudu Bawumia, if elected next year, will design a long-term framework to deal with the cedi,” he added.
Current Economic Context
The cedi has experienced significant depreciation, weakening by 14 percent against the US dollar this year alone. It started the year trading at GH¢11.97 to the dollar on the interbank market and GH¢12.33 on the retail market. Currently, it is bought at GH¢13.90 and sold at GH¢13.91 at the interbank rate, with forex bureaux in Accra quoting as high as GH¢16.30 to the dollar.
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This depreciation has had considerable impacts on businesses, especially in manufacturing and commerce. Many business associations, including the Ghana Union Traders Association and the Chamber of Automobile Dealership Ghana, have urged the government and the Bank of Ghana (BoG) to take urgent action. The rising costs of goods and services, driven by the weakening cedi, are making it challenging for businesses to remain viable.
Government Measures
In response, the government has announced several measures to stabilize the cedi. These include intensifying the Gold for Oil and Gold for Reserves programmes and accelerating fiscal consolidation processes. Additionally, the government expects to receive a combined $2.3 billion from development partners to support the local currency.
Signs of Improvement
Finance Minister Dr. Mohammed Amin Adam recently noted that despite recent pressures, the cedi had shown signs of stability. The depreciation rate has significantly improved over the past year, with the cedi’s depreciation against the US dollar halving from 54.2 percent at the end of November 2022 to 27.8 percent at the end of December 2023. As of May 20, 2024, the cumulative depreciation stood at 14.2 percent, compared to 20.7 percent during the same period in 2023.
Conclusion
The Deputy Finance Minister’s remarked on the deep-rooted challenges of cedi depreciation, stressing the need for a collective, long-term approach to address this issue. With strategic frameworks and collaborative efforts, the government aims to stabilize the cedi and mitigate its adverse effects on the economy.