HALTING DECLINE OF THE CEDI

Page 7: Daily Graphic, May 31, 2012. WITHIN the last three months, the cedi is reported to have depreciated by 20 per cent. The operation of dollar accounts, the payment of services in dollars, including school fees and rent, the high import dependency of the economy and the mad rush for dollars are some of the reasons said to be contributing to the decline in the value of the cedi. The government and the Bank of Ghana (BoG), in response, have instituted a number of measures to arrest the decline, including the injection of more than a billion dollars into the economy, raising the policy rate from 13.5 to 14.5 per cent, the introduction of other levels of treasury bills and the raising of bonds to stabilise the cedi. At a meeting with President J. E. A. Mills at the Castle on Tuesday, the Head of the Ghana Team of the IMF, Ms Christina Daseking, expressed worry over the challenges confronting the economy this year, as opposed to last year, saying that “the fiscal situation last year was very strong”. She noted that although oil imports had risen, the domestic price of fuel had not been adjusted upwards, a situation which was accruing a GH¢60 million debt every month. It is reassuring that the President again expressed the government’s determination to confront, head on, the challenges facing the economy, particularly as the country geared up for the general election in December. He said although issues which were usually associated with elections were likely to be more challenging in the run-up to the December elections, “we will make sure that things are made easier for ordinary Ghanaians”. Forex bureau operators and the Ghana Union of Traders’ Associations (GUTA) have called for urgent measures to be taken to arrest the depreciating cedi. The Association of Ghana Industries, the Ghana Trades Union Congress and the Centre for Policy Analysis have all taken issue with the free fall of the cedi recently. Ghana is not the only liberalised economy, but how do we expect to strengthen our local currency when we have “dollarised” our economy? The Daily Graphic has, on several occasions, raised concern over the depreciation of the cedi and the factors contributing to it. The tension surrounding this year’s elections is also said to make people buy and keep the dollar in their homes or the opening of accounts in dollars in anticipation of some challenges during the elections. The prices of commodities keep soaring by the day, while workers’ salaries remain the same. The labour scene has itself not been spared industrial actions and threats of strikes. Although the government has instituted some subsidies to mitigate the cost of living among ordinary Ghanaians, the IMF tells us those subsidies are benefitting only those in the higher echelons of society. Maintaining consistent fiscal discipline has become a major headache for many developing countries, especially those on the continent of Africa who have chosen the path of democracy. Fortunately, Ghana has been successful in maintaining fiscal discipline in the last couple of years, resulting in the attainment of single-digit inflation and a stable macroeconomic environment. But with the continuous decline in the value of the cedi and the high cost of doing business as a result of the high exchange rate, the Daily Graphic believes the government has to remain focused on its economic management policies. The complaints from the IMF and the business community should alert us to the reality that the economy is still fragile and needs more shock absorbers to withstand the competing claims in the system. The Daily Graphic calls on the Finance Minister, Dr Kwabena Duffuor, and his team to take bold steps to keep the economy stable and strong, even in the run-up to the December polls.