Accra, Ghana//-The Deloitte Country Managing Partner for Ghana, Daniel Kwadwo Owusu has urged the managers of the Ghanaian economy to design permanent solutions to stop the rising cedi depreciation in the country.
According to him, designing permanent policies or solutions would address the U.S. dollar and Ghana Cedi depreciation nightmare and further gradually transform the economy.
Mr Owusu made the call in an interview with African Eye Report and some journalists at the sidelines of the just-ended Ghana CEO Summit held in Accra.
The latest data released by the Bank of Ghana (BoG) indicated that the cedi, the local currency has experienced an average depreciation of 6.2% against the three major trading currencies: the U.S. dollar, Pound, and Euro.
This is a significant decline in the 22.3% average depreciation recorded as of March 2023.
The BoG’s March 2024 Summary of Economic and Financial Data pegged the cedi at GH₵ 12.74 to $1, marking a year-to-date depreciation rate of 6.8%.
The depreciation rates for the cedi against the dollar for January, February, and March were 1.3%, 4.7%, and 6.8%, respectively. As of today June 3rd, the cedi is trading at over GH₵15 against the dollar.
Permanent solution
Answering a question on what can be done to stop the cedi from the free fall, he said: “I think we need to find a permanent solution. The permanent is to look at the structure of our economy”.
Mr Owuso explained that Ghanaian multinationals need to play a crucial role in the exportation of the country’s resources to ensure that the money they make from the export of the resources is trickled down to the people.
Contrary to the notion that Ghana does not export much to the international market, he said: He pointed out; that in recent times “we export more in terms of trade than we import, so exchange rate shouldn’t have been a problem”.
However, the country’s overdependence on imported goods as it imports rice, cereals, tomatoes and almost everything, must be checked, according to the expert.
Mr Owusu said that the country would not get that solution with a policy change.
The country will get that by taking policies and gradual changes over a period and making sure that it has multinationals who can take the ownership of the economy into Ghanaian hands such that when they export the funds will come down and it will shore up the cedi.
On the over-dependence on imported goods, he called for a pragmatic gradual approach to correct this imbalance.
For instance, “If we start producing rice, how long will it take, from three to four years? If we want to have a mechanised tomato farm whatever, how long will it take?
If we were doing it gradually, we would have solved one or the other. If have solved one problem we know that the other one is also there to be solved.
Then gradually, we won’t even mind whether the rate is escalating or not, because we know that at some point, we are going to keep it in check”.
Touching on the current debt stock which according to the BoG has climbed to over a staggering GH₵680 billion.
“If the rate at which the debt will be paid even increases, so we will be sitting here today and tomorrow our debt stock can double even with the exchange rate alone and not because we have borrowed more.
That is why I come back to the problem. If you go into the analysis, you find that the total amount that we are talking about is 680 billion cedi as of this morning’s news”.
But when you check you will see that part of it might be coming because of the exchange rate. Because we will convert the amount that we owed into U.S dollars, he said.
Election year business cycle
During the election business cycle, he urged the government to stick to its recent promise that it won’t overspend in this election year.
Ghana already has policies that limit how much a government can spend over and above its budget. However, present, and successive governments do not comply with that.
Mr Owusu is hoping and praying that this year the government will keep to its promise of spending within the budget.