The Member of Parliament for the Builsa South constituency, Dr. Clement Apaak, has challenged the Vice President, Dr. Mahamudu Bawumia to prove his competence in managing the Ghanaian economy by saving the cedi from further fall against major trading currencies.
The Ghana cedi is projected to hit 6 cedis to a dollar by 2022, according to a prediction of the Economist Intelligence Unit, a specialist publisher in the UK.
The Economist Intelligent Unit, which has operated for about 60 years, also warned that the local currency may suffer some external pressures that may cause the cedi to depreciate by next year.
According to the figures captured in its latest report, the cedi may suffer some depreciation by end of this year—2018.
The report cited the tighter monetary policy in the US from the latter part of 2017 into this year, and the renewal of political uncertainties associated with Ghana’s 2020 elections, as the basis for the prediction.
As at the close of Friday January 3, 2018, the dollar was trading at 4 cedis 59 pesewas to the cedi on the interbank foreign exchange market.
Speaking to the Daily Democrat, Dr. Apaak recounted how Dr. Bawumia boasted whilst delivering a 40-minute presentation at a town hall meeting organised by Joy FM last year to assess the 100-days of President Akufo-Addo in office, that the free fall of the cedi has been arrested and the keys given to the Inspector General of Police (IGP) for safekeeping.
According to him, Dr. Bawumia, prior to the New Patriotic Party’s victory in the December 7 2016 polls, accused the Mahama administration of ignoring solutions he proffered to Ghana’s ailing economy and the cedi. Dr. Appak believes this now is the time for Dr Bawumia to make a difference.
“…Before he became the Vice President, he had engaged Ghanaians both home and abroad as well as the international community on a series of lectures largely about the economy and what he and his party had perceived was not going well. And the impression we all got including many Ghanaians was that they had the solutions to the challenges we were facing. So if on the basis of these arguments persuasively, he and his boss, the President, are now in charge of the affairs of this country, then logically we have every reason to expect that he would be able to arrest the cedi as he has said on numerous occasions,” he argued on Citi FM’s News analysis programme, The Big Issue on Saturday.
Dr. Apaak explained that, although the NDC recognize the fundamental issues affecting the Ghanaian economy as well as implications on the performance of the cedi, the NPP disregarded their explanations when they [NPP] were in opposition.
“That is not to say that we don’t recognize…that there were some fundamental issues that go to the core and foundation of our economy which has implications on how well our currency performs vis-à-vis other global currencies particularly the dollar. We had always explained that we are largely an import dependent country, we don’t produce much of what we consume, we are also affected by global turbulence in terms of price vacillations. We had made all these arguments but they [NPP] said no, and that it was as a result of incompetence. Well we now have a competent team in place so arrest the cedi. That is the argument we are making,” he added.
There have been several complaints from some financial analysts concerning the health of the cedi which has been depreciating in the last few months.
Some financial observers including the GN Research have also described the cedi as “the worst performing currency on the African continent” in recent times.
The Minister Finance presented the 2017 budget statement to Parliament last week, however, the Minority in Parliament claimed that the document does not have a clear roadmap in stabilizing the cedi.
The cedi’s current poor performance against the dollar is expected to run into the second quarter of 2018. This is the prediction coming in from some currency analysts.
More than one year into Akufo-Addo/Bawumia administration, it is clear that the perennial challenges that the cedi faced in 2017 have commenced in earnest.
The development has led to warnings from importers over the likely increase in the prices of imported goods in the coming days if the development does not improve.
Performance of cedi in 2017
The cedi commenced the year at 4 cedis 20 pesewas on the interbank foreign exchange market.
Figures at the Bank of Ghana as well as Forex bureaus across the country showed that the cedi depreciated by about 5.4 percent between January and February of Akufo-Addo/Bawumia administration alone on the interbank forex exchange market and as much as 6.72 percent in the same period across forex bureaus in the country.
In the same period a year earlier (2016 under the Mahama administration), the cedi performed better in forex bureaus across the country depreciating by only 2.5 percent.
BoG steps in to save cedi
As part of moves to deal with the cedi’s woes in 2017, the Bank of Ghana auctioned about 40 dollars in January, 2017 and an extra 20 million dollars in February from cash from inflows from the cocoa syndicated loan.
Industry players believe delay in cash inflows from the International Monetary Fund program as well as petroleum receipts following the purchase of crude and gas to power the country’s power plants have also contributed to the woes of the cedi.
Meanwhile demand outweighing supply is also having an impact on forex bureau operators in the country especially in Accra.
A forex bureau owner told Citi Business News he has had to reduce his weekly supplies by over 70 percent because of current supplies which are too low to meet demand.
” Before, within a week, you can get more than $10,000; but now, you hardly do; we get only three or four thousand for the whole week. So, imagine you are in a business centre and a client wants something like $10,000 and the whole week you can’t even get three thousand and its very alarming ”.
Reasons for cedi’s poor performance
General Manager of Treasury at HFC Bank, Mr Joseph Nketsia, told Citi Business News low supply as well as hoarding of dollars among others have led to the development.
”The supply of the foreign currencies on the market is not matching up with demands. This is a normal trend at the beginning of the year, we get importers who imported goods for the Christmas and either deferred letters of credit or on collection bases, this is the time that they would have to pay their suppliers.
Also, people who are restocking their shops, normally during the Christmas when they sell, they don’t restock so they keep the cash and then as we enter the new year, they start restocking”.
According to projections, the poor performance of the cedi would continue into the end of the first quarter of 2018.
Prices of imported goods to increase
Traders at Abbosey Okai are not happy with the current performance of the cedi. Abbosey Okai is home to dealers of car parts and engines; the centre commands a huge stock of foreign exchange daily and traders depend heavily on foreign currency because they import majority of their products.
According to the traders, they may be forced to push the extra cost to their consumers if the development does not change anytime soon.
”The cedi has not performed well this year, it took a short time to rise this way so people are now getting to know the changes, if it continues from next week we will be forced to increase the prices of our products”.