The recent depreciation of the cedi has rejuvenated the aged old postulation on the need for Ghana to focus on export-led development programmes and reduce the anything foreign syndrome. In the past three months alone, the cedi has lost over 15 per cent in value against all major international trading currencies.
According to the International Institute for the Study of Culture, institutions and enterprises, the average annual depreciation of the cedi in the past three decades is around 20.3 per cent with the election year 2000 being the worse with about 48 per cent.
To what extent does the citizenry understand the phenomena and how do we involve all stakeholders in anchoring sustainable solutions to stabilise the cedi for proper business planning and economic growth.
Indeed I have heard some politicians say the depreciation is good for the country as it makes our exports cheaper and thus urged various players in our economy to take advantage to boost export volumes. Yes, it is a simple economic principle that should work in the normal circumstances but does it work for Ghana at the moment?
I don’t believe so. My answer is grounded on the premise that we have not as a country sustainably developed and broadened our export base to take advantage of the value drop and therefore not workable in our favour.
Secondly, the depreciation is not a planned devaluation where managers of the economy sustainably plan with industrial players to drop the value of the currency to create a competitive advantage for exports.
In a fast currency depreciating economy such as ours, the economy suffers many ills that threaten the basic foundation if not reversed quickly into stability. The currency becomes valueless as a store of wealth and I am not surprised that many Ghanaians are keeping hard currency to protect the value of their assets in our country, worsening the cedi situation artificially.
Credit business which has become part of our business culture in recent times as a result of globalisation is also taking a different paradigm as creditors are either giving shorter credit terms or extended credit with very high mark ups as the continuous depreciation will lead to loss of working capital or the replacement value of goods sold become unsustainable.
The instability in the currency will always cause planning headaches for firms, especially for those with imported inputs.
A recent discussion with some members of AGI indicated lots of worries as the local cost of production continues to increase on the account of exchange losses and yet there is no opportunity for cost download to customers as that will soon throw them out of business. Business that are smart are hedging, however, that is not enough to cushion the losses.
One question that has not been answered in the discourse is the role of the Ghanaian in dipping the cedi and whether the ordinary Ghanaian is aware that the insatiable preference for anything foreign has a cumulative negative impact on the value of our currency?
Most discussions have been so theoretically and academically packed to the extent that the real contributor to the problem is left confused.
In fact, I was told a story of a local politician who told his constituents that the other political party does not work in their interest because in the past when they received remittances they could only exchange their US$10 for Gh¢20. On the other hand since they came to power, with $10, one can get almost forty (Gh¢ 40) he is said to have remarked: “What is better than this”?
It is important that the Ghanaian supports the managers of the economy to steer the rocking boat, however, the public need to understand the issues to throw in their support. Does the drinking bar operator who just bought a “home used” refrigerator know that some dollars have been flown out? And soon, that second hand refrigerator has to be replaced with another one costing us more pain in the demand for the almighty dollar?
How about the affluent in our society, including our political leaders who just paid the school fees for all their children to study abroad and leave our schools for the poor; do they recognise what they cause the cedi?.
Does the accounting student who has ignored the Institute of Chartered Accountants Ghana programmes and sent out the Ghanaian hard-earned British pound to pay for ACCA or CIMA realise his contribution to the dipping of the cedi?.
By: Andrews Akolaa