IEA highlights urgent need to address cedi's instability

The Institute of Economic Affairs (IEA) has voiced serious concerns over the persistent instability of Ghana's Cedi, citing a staggering depreciation of 99.99% from 1983 to 2024.

The IEA attributes this decline to the failure of successive economic managers to effectively address the issue.

In a press statement dated Monday, May 20, 2024, the IEA criticized policymakers for their

Read full articlereactive rather than proactive approach in handling the cedi's depreciation. The institute pointed out that the reliance on the International Monetary Fund (IMF) and development partners for financial stabilization is "unsustainable."

"Since Ghana adopted a flexible exchange rate regime from 1983 when the cedi was pegged to the dollar at a rate of 2.75, the currency has continued on a declining path with only short intermittent periods of stability-to May 16, 2024, when the official rate is quoted as GHS13.77=USD1.00 (or 137,700 old cedis=1 US dollar). On a cumulative basis, the cedi has depreciated by 99.99% from 1983 to 2024. It has to be noted that, mathematically, any quantity that depreciates (or devalues) by 100% falls to zero or virtually vanishes," the statement read.

The IEA emphasized that Ghana's repeated engagements with the IMF have not resulted in lasting stability for the cedi. It urged immediate and effective measures to address the underlying issues and prevent further decline.

"This tells us that the cedi is under an existential threat and requires urgent actions to rescue it from that threat. Unfortunately, over the years, our economic managers have failed to address the cedi problem head-on. The problem is that our policymakers have consistently failed to take the requisite measures to buttress the cedi. Almost invariably, they wait till the situation begins to get out of control before they adopt firefighting, albeit unsustainable, measures

"For instance, presently, we seem to be waiting for the IMF’s and other developing partners’ funding before restoring some stability to the cedi. This approach, however, is not sustainable, as history has taught us. We have been to the IMF seventeen times, but that has not brought any lasting stability to the cedi," the IEA stated.