Over the past decades, Ghana’s economy has encountered several challenges. Some of these challenges have been attributed to government policies, rapid population growth and so on.
Unfortunately, these economic challenges have had adverse effects on the value of the Ghana Cedi. The Cedi, these pastyears has continually depreciated against major currencies on the foreign marketat an alarming rateregardless of the petroleum production era the country is thrown in. Despite numerous suggestions from well-known tax and economic experts on handling the issue, the issue of depreciation of the Ghana Cedi still exists, emphasis on the Dollar Cedi Conundrum. Government policies have been put in place to tackle the situation but none seems to break the status quo. What could be the reason? This is the questionthat still lingers in the minds ofGhanaians.
Ghana, fortunately, is endowed with a lot of natural resources such as gold, bauxite, petroleum, cocoa and others which have high economic value on the world market. Notwithstanding the economic challenges still persist. Concerns have been raised about the quality of economic growth with regards to employment and the general improvement of the livelihood of Ghanaians. The country’s sectors ofhealth, transportation, agriculture and labourhas not been untouched by this economic plague.
Ghana’s economic growth fell at the onset of oil production from 14% in 2011 to
3.5% in 2016, the lowest in 2 decades. The economy recovered in 2017, growing an estimated
6.3% spurred by recovery in non-oil sectors, lower inflation and new carbon wells (the Tweneboa, Enyenra, Ntomme and Sankofa oil and gas fields).
In addition, Ghana’s economic challenges are further worsened by the continuous depreciation of the Cedi against the dollarin such a time where the country has started the production of petroleum. For the past decade, the Cedi’s value against the Dollar has reduced at an alarming rate. The Ghana Cedi has lost 77.9% of its value to the US Dollar from July 1, 2007, when it was redenominated. At the close of 2007, the Dollar-Cedi exchange rate was GH₵0.9599 per the Dollar compared to the present exchange rate of GH₵5.14Ghanaian Cedias at April, 2019.
However, the Cedi’s depreciation didnot just occur by itself but was caused by certain factors. Some of the factors include inflation rates, interest rates and government debts. Also, Ghana’s terms of trade and over dependence on foreign products have led to the Cedi’s depreciation resulting in the Dollar-Cedi conundrum. The increase in the prices of petroleum on the world market compounds the problem the more.
Unfortunately, the Dollar Cedi conundrum has also come along with its negative effects. It has had negative consequences on businesses who deal in the purchase of foreign goods. One group of people who will be hit the most is the traders who ply the Dubai and China trade routes. These trade routes have become busy and vital routes for Ghanaian traders who deal in assorted ranges of wares like mobile handsets, dresses and children’s wares which are purchased in hard currencies (US Dollars). The traders buy these currencies from foreign exchange market. A strong cedi will give them more Dollars and thus more goods and vice versa. This will increase their profit margin as they will be able to buy more goods. However, this is not so as the current depreciation of the Cedi will affect their working capital because many of them will run at a loss and may end up passing the extra cost to the consumer which will cause more financial hardships.
To sum up, government needs to take workable actions to curb the alarming economic challenges caused by the Dollar-Cedi problem to help bring it under control. The setting up of the Economic Advisory Council (EAC) by the government is a step in the right direction. Also, to help the Dollar Cedi conundrum,government should minimize its foreign aid which come in the form of loans that end up as debts and over dependence of foreign goods should be minimized strategically.
A Level 300 student of the Ghana Institute of Journalism