Depreciation of cedi due to acute shortage of dollar supply in the system - Adongo

Member of Parliament for Bolga Central, Isaac Adongo has hinted that the current round of depreciation of the cedi is due to acute shortage of dollar supply as a result of exit of foreign investors from Government Bonds and the increasing consumption imports.

He said that foreign investors are taking their monies out of the country due to

Read full article“unattractive interest rates” adding that things may get worse by April 2019.

“Ghana’s low levels of Net international reserves of $3.2billion is increasing external vulnerabilities and creating uncertainties of the country to deal with increasing demands of foreign currencies by foreign investors taking their monies out of the Country due to unattractive interest rates and demands by importers,” he said in an interview with Ghanaweb TV.

He mentioned that “The Government failed to raise Ghc4.150billion on treasury bills and bonds, raising only Ghc1.3 billion with a shortfall of Ghc2.8billion. The foreign investors who buy these bonds normally bring in dollars to their banks and exchange them into cedis to buy the bonds, thereby leaving more dollars in the banks to increase liquidity or supply of dollars to ease the pressure on the cedi. Unfortunately, the continuous politically motivated cuts in the Policy rates by the Bank of Ghana is driving these investors and critical source of liquidity or supply of dollars away leading to acute supply shortage of dollars. “These uncertainties are likely to get worse after April when Ghana exits the IMF if the Bank of Ghana does not stop politicization of monetary policy and focus on aligning monetary policy to reversing the alarming capital flight or portfolio flow reversals.”

Adongo further indicated that the government is now shifting towards increasing consumption on imports while declining capital and immediate goods import.



“It is worrying that Ghana's non-oil imports are now shifting towards increasing consumption imports and declining capital and intermediate goods imports.”

“’Imports of capital goods to expand manufacturing and productive capacity to support local production and job creation declined from $2.2 billion in 2016 to $2billion in 2017 and further to $1.9billion in 2018. Similarly, imports of intermediate goods for production, contrary to Dr Bawumia's promise to eliminate import duty on intermediate goods to increase it imports has declined from $5.8billio in 2016 to $5.2 billion in 2017 and further down to $5.1billion in 2018.Strangely, imports of consumption goods have been increasing from $2.1billion tin 2026 to $2.4billion in 2017 and $2.6billion in 2018.” He said

According to Adongo, the country is gradually reversing all the gains of local manufacturing and creating an import of consumption goods economy. This, he posits, puts more pressure on the cedi as importers are demanding dollars