Finance Minister, Ken Ofori-Atta, has launched a spirited defence of the depreciation of the cedi in Parliament insisting the fall of value is not result of a stuttering economy.
According to him, speculative behaviour of portfolio investors and market participants are the primary reasons for the free fall of the cedi against the major trading currencies.
Finance Minister, Ken Ofori-Atta, who disclosed this in a statement to Parliament last Thursday to announce completion of the Extended Credit Facility (ECF) programme with the International Monetary Fund (IMF), indicated the depreciation is not due to weak economic fundamentals.
The cedi, he said, experienced turbulence despite strong fundamentals and improvements in the balance of payments that government achieved over the past two years and stressed that generally the cedi has performed better over the last two years compared to between 2012 and 2016.
“Cumulative depreciation from 2012 to 2016 was 65.42% but between December 2017 through the whole of 2018 to March 2019, the cedi depreciated by 17.32%.”
The cedi, he noted, has started its recovery even before the Euro bond was issued and stressed this has confirmed the confidence investors have in the Ghanaian economy with the US$21 billion rush.
“The cedi has made great strides towards recovery on the back of the successful issue of the US$3 billion Eurobond and the completion of the 7th and 8th IMF reviews, which restored confidence in the economy.”
“Currently, the cedi has witnessed substantial gains and with the measures we have put in place, based on the existing sound economic fundamentals, we anticipate stability of the cedi going forward.”
“Indeed, the Cedi has appreciated by 5.12% in March 2019 alone as against a depreciation of 2.17% in the same period last year.”
Government, Mr. Ofori-Atta pledged, will build on this success and put in place structures to strengthen the resilience of the Cedi.
Government, he stated, has completed the Extended Credit Facility (ECF) with the International Monetary Fund entered into by the previous administration and stressed the programme has been stern but necessary to fix the broken down economy.
He disclosed that successful completion of the ECF has made approximately SDR 132.84 million (about US$185.2 million) available to Ghana, bringing the total cumulative disbursement to SDR664.20 million (equivalent to US$934.4 million).
However, Member for Bolgatanga Central and a member of the Finance Committee, Isaac Adongo, argued the Finance Minister is being economical with the truth.
He noted that troubles of the local currency is not over as Bloomberg, a global tracker of currencies has reported the cedi is still selling at GH¢5.54 to the U.S dollar and urged the finance minister to stop politicising the cedi depreciation and find a sustainable way of keeping it stable.
On Ghana’s exit of the IMF programme, he indicated that this is not result of satisfying the conditions but a waiver government requested for non-observance of the performance criteria, which was granted.
“Mr Speaker, we are worse than we entered the IMF and that is a fact,” he stated.
According to him, Ghana’s total wage bill in 2016 was GH¢14 billion but this figure has jumped to GH¢22 billion representing 53 per cent increase.
He said, “If this continues by the year 2020, we would have doubled our wage bill that we left in 2016,”
“That is the height of indiscipline and yet the Finance Minister says he is right-sizing the government. What sort of right-sizing is it that has increased your wage bill by 53 per cent,” he queried?
Mr. Adongo averred that the country’s interest payment had increased from GH¢11 billion in 2016 to 15.8 billion in 2018 and projected to hit 18.6 billion in 2019 contrary to claims by the Minister in the 2017 budget that government was re-profiling the country’s debt to reduce interest payments.
He said, “What is worrying is that government now goes to borrow to pay for goods and services amounting to GH¢10.6 billion every year at the expense of capital investment.”
He argued that the recent 12 and 31-year bonds were not because investors had confidence in the current government but because it has only two of its four-year term left.
By Osumanu Al-Hassnfirstname.lastname@example.org