Cedi depreciation: Inject more US dollars into the economy - Economist to BoG

Rating agencies downgrade Ghana’s economy

Government struggling to pass key legislation in Parliament

Fiscal managers of the economy urged to live up to expectation

Finance Lecturer at the University of Ghana Business School, Dr Benjamin Amoah, has urged the central bank to inject more US dollar currencies into the economy.

According to

Read full articlehim, the move is necessary to address the persistent depreciation of the Ghana cedi by about 7.60 percent to the US Dollar from January 1 to February 25, 2022.

In an interaction with Joy Business, Dr Benjamin Amoah lamented the cedi’s performance against other trading currencies and cautioned a solution must be found to address the general economic situation.

“I must say that the cedi’s performance in the first two months has been a bit of a shock to us although we anticipated that 2022 will be a difficult year for the Ghana cedi. We never thought that it will be quick,” he said.

“What is happening to the Ghana cedi is because of the nature of the current condition of the economy. If you had observed from last year, especially last quarter of last year, the Governor of the Bank of Ghana [Dr. Ernest Addison] made some statements at the Annual Banking Dinner, and if you read and analyse his report, the statement that he made in there shows that the economy was really having some difficulties. So that is one,” Dr Amoah is quoted by JoyBusiness.

The economist further urged government’s fiscal managers to live up to find key solutions, measures to addressing the economic situation.

“Two is also the fact that our managers of the economy have also not been able to help us push across the confidence of the Ghana cedi. I’m saying this with reference to the statement made by the Minister of Finance [Ken Ofori-Atta] in Koforidua concerning the need that we have to pass the E-Levy if not the economy will be in shambles," he stated.

"...He [Ofori-Atta] was being truthfully, but then if you want to rally around confidence you have to preach some level of hope to get investors to buy into your economy. Nonetheless, the fundamentals of the economy speaks volume of what we finally find ourselves; inflation is on the high, interest rates is on the high”, he added.

He continued, “in the short term, there is a speculative attack on the currency and so the only way to deal with the short term is to again call on the Bank of Ghana to do the injection of dollars into the system [circulation]. So that in the short term, the excessive pressure on the currency can be controlled”.

“Then to the medium to long term, we can look at what we can do in terms of some of the structural things we need to do. If we are importing a lot, we need to look at that importation, so we can reduce the pressure on our currency”, the finance lecturer added.

Meanwhile, on the international capital markets, investors have signaled uncertainty about Ghana's economic outlook and prospects.

Key rating agencies such as Moody's Investor Services and Fitch Ratings have all downgraded Ghana’s creditworthiness.

Already, government is struggling to approve key legislation in Parliament despite presenting its 2022 budget statement in November last year.

The announcement of the Electronic Transaction Levy by the Finance Minister [Ken Ofori-Atta] has courted controversy and widespread condemnation by lawmakers and a cross-section of the public.

Some market analysts, however, believe the cedi’s current woes against major trading currencies are likely to impact trading activity, disposable income of consumers and budgetary allocation of key corporate and government institutions.