President Akufo-Addo, has directed an investigation into Ghana’s cyclic currency depreciation after another round of battering triggered a lamentation, suggesting the government needs an urgent help in running the economy.
Finance Minister, Ken Ofori-Atta, who was touted by the governing New Patriotic Party (NPP) as one of the best financial gurus, in the world, told Parliament yesterday that the Akufo-Addo government is set to form a bi-partisan committee to carry out the investigation in the fall of the cedis.
The cedi by March 13, had depreciated against its major trading currency, trading at around ¢5.80. It, however, began to appreciate last week, selling from between ¢5.50 to ¢5.20.
Independent traders were selling dollars for cedis at rates as low as ¢4.70 to the dollar in Accra. Checks online as of Thursday, the local currency is selling at ¢5.17.
But the Akufo-Addo administration is not alone in this struggle as previous governments have suffered same.
For instance, during John Mahama’s tenure as President, the depreciation of the cedi was much more marked than its performance these past few months under the Akufo-Addo government.
In former president Mahama’s first 26 months, from January 2013 to February 2015, the cumulative depreciation of the cedi against the US dollar stood at 45.8 per cent.
However, in the first 26 months of the Akufo-Addo government, from January 2017 to February 2019, the cumulative depreciation of the cedi was 14.6 per cent.
In 2013, under Mahama, the cedi depreciated by 15.6 per cent and it depreciated further by 32 per cent in 2014. In 2015 and 2016 it depreciated by 11.9 per cent and 9.7 per cent, respectively.
Under Akufo-Addo, however, the cedi depreciated by 4.4 per cent in 2017 and 8.8 per cent in 2018. So far in 2019, it has depreciated by 3.6 per cent.
But government does not want to get comfortable. The Finance Minister says President Akufo-Addo wants a solution to the problem sooner than later.
Mr Ofori-Atta told Parliament yesterday when he delivered an update on the country’s completion of the International Monetary Fund (IMF) programme entered 2015, took advantage of the opportunity to talk about the depreciating cedi.
He said “the president has directed that I investigate the structural causes for the depreciation of the cedi and to propose measures to address the situation.
“The governor and I will put a bi-partisan committee together to proceed immediately,” he disclosed.
Mr Ofori-Atta said the recent depreciation of the Ghana cedi was not as a result of weak economic fundamentals.
According to the Minister of Finance, the cedi is performing better under the Nana Addo administration.
“The cedi suffered major turbulence during the first quarter of the year mainly as a result of a confluence of factors including pressure on the current account as a result of income transfers by corporate as well as seasonal importers among others. This turbulence happened, despite the strong economic fundamentals and improvements in our balance of payments which our government has achieved in the last two years.
“We have done so much work to ensure that the economic fundamentals are robust and able to support economic growth and transformation. It is also note worthy that despite this challenge, the cedi has performed better over the last two years than when compared specifically to 2012 and 2015 ,” said the Minister while addressing Parliament on Thursday.
The value of the cedi until earlier this week, had greatly reduced, sparking concerns of economic challenges.
At a point, it was trading at GHc 5.80 to a dollar but it began gaining strength this week after a government intervention which was actually expected to yield evident results within two weeks.
A former Deputy Finance Minister under President Mills’s administration, Fifi Kwetey, has said the recent appreciation of the cedi is only temporary and will depreciate again.
According to him, the government’s capital injection into the economy as a means to stop the currencyfrom depreciating, will not solve the challenges with the economic fundamentals responsible for the currency’s depreciation.
The Minority in Parliament has already discredited the development but thegovernmenthas been quick to tout the achievement which it says is an indication of a stronger economy but Fifi Kwetey says the improvement being seen with the cedi will not last.
“This temporary injection that has taken place is basically going to have the same effect [as last year]. They did that, thinking that somehow that is going to lure the people into a certain sense of security but that security will be short-lived,” he said.
But the Information Minister Kojo Oppong-Nkrumah, has also called for positive speculation around the cedi as it appreciates against the dollar after months of free fall.
In a plea on the floor of Parliament, the minister urged more focus on the positives of the economy “so that our currency will continue to enjoy the resilience that it is beginning to experience today.”
The minister has in the past accused the Minority in Parliament of speculating negatively about the cedi to spark panic.
“There is some a practice in this country where some people specialize in speculating down the Ghana cedi for us all and the activities of speculators and the speculation and the speculation that is incessantly associated with the currency contributes to this exercise. Mr. Speaker, today, in the name of Ghana, we would like to plead with such persons that as we come out off this programme and us currency begins to experience a rebound, let us speculate the positives.”
Mr. Oppong-Nkrumah also espoused confidence in the Akufo-Addo administration to be fiscally disciplined as it exits the International Monetary Fund (IMF) programme on April 2.
The Executive Board of the IMF just approved the final disbursement of about US$185.2 million to Ghana.
“We have shown a commitment, the competence and the discipline required to meet the target and come out of that programme,” Mr Oppong-Nkrumah said.
“We have also put in place the infrastructure for irreversibility, he added, referencing the Fiscal Responsibility Act.
“It is key in ensuring that tomorrow, we don’t run this economy aground and go back for another bailout programme.”