A GHANAIAN Economist and the Founder of the Ghana Growth and Development Platform (GGDP), Mr. Kwamena Esilfie Adjaye, says the dollarisation of the economy is the source of the rapid fall of cedi against the major foreign currencies.
According to him, the practice of pricing goods and services in the US dollar, even though has been with us for long time, has become widespread in recent times. He said this during the media launch and presentation of working papers of the Ghana Growth and Development Platform (GGDP) in Accra on Tuesday.
Mr. Adjaye said the cedi has been depreciating because the demand for dollars and other foreign currencies exceeded supply.
He said: “The dollars and other foreign currencies we demand to pay for our imports of goods, services, repatriation of earnings on foreign investment, and servicing and repaying foreign loans, exceeds the supply of dollars and other foreign currencies from our exports of goods, services, particularly, remittances, repatriation of foreign earnings on our investments overseas, foreign direct and portfolio investment, and foreign loans and grants.”
He explained that the leading source of foreign currency is export revenue, but it has been less than our import cost for years, leading to merchandise trade deficit. Mr. Adjaye added that the Bank of Ghana (BOG), on February 4, 2014, revised and instituted new foreign exchange measures, as the cedi continued to depreciate significantly. He mentioned measures as Additional Operating Procedures for Forex Bureaux in Ghana, Revised Rules on the Operation of Foreign Exchange Accounts (FEA) and Foreign Currency Accounts (FCA), and Repatriation of Export Proceeds (REP).
He, however, lamented that when the FCA and FEA were introduced as part of the financial banking reforms, they served as vehicles for attracting remittances, transfers and deposits in order to increase the supply of foreign exchange so as to bridge the shortfall in supply from export revenue. He said that controlling and limiting the use of FEA and FCA had decreased supply into those accounts in banks and driven supply into forex bureaux and the black market, and worsened the supply and depreciating conditions.
Again, since holders of accounts face controls in the use of their accounts, they had decreased their demand for foreign exchange in the banks and shifted their demand into forex bureaux and the black market. These measures have also made holders of foreign currencies reluctant and turning to the black market. When asked if the depreciation was caused by the redenomination of the currency. He said: “we only dropped some zeros,” so I cannot understand why a redenomination would have that effect. “It is not responsible for the depreciation.”
However, the only responsible thing is there is not enough supply of foreign exchange. The Co-Founder of the GGDP, Theo Acheampong, also highlighted on the issues of the Economic Partnership Agreement (EPA), and whether it was really important. He said Ghana, Nigeria, Ivory Coast and the other countries contribute the chunk of exports to the European countries, and that if they are controlled by the EPA, they would be at a loss.
He said trade balance has been over 10 billion Euros since 2012, and has been perverse, explaining that exports to the European countries were mainly agricultural products, whilst the imports were industrial products which were more expensive. Mr. Acheampong observed that in recent times, more of the imports were from China, Brazil and other countries other than Europe, and therefore, wondered the need for the EPA.
Again although the EPA talks about free entry of goods, it was not that free, but comes with strict orders, citing an instance where mangoes from India were deported and banned, all because there was a housefly on it. He, therefore, recommended that Ghana must set up a surveillance device and monitoring system for selected products at the first point of entry, to enable easy collection of information (price, quantity and others) for anti-dumping purposes, as the country can still suffer from adverse competition, through lower prices from the EU.
The Interim Secretary of the GGDP, Mr. Jonas Atingdui, in his address, said Ghana had come a long way since independence, but faced numerous socio-economic challenges as a nation in ensuring equitable and sustainable growth and development.
Source: The Chronicle
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