President J. D. Mahama
Posted on: www.dailyguideghana.com
By William Yaw Owusu
By William Yaw Owusu
Accra, Thursday September 6, 2012.
President John Mahama says the free fall
of the cedi free should be blamed partly on global currency volatilities.
He explained that the situation led to
the near collapse of the Eurozone and also affected the fiscal stability of
most emerging economies including India, saying “in the first half of this year
we have had concerns about the depreciation of the cedi. This has resulted from
a combination of factors.”
The daily depreciation of the Ghana cedi
against major currencies has become a major headache for economic managers of
the country.
While some analysts attributed the
decline to the surging demand for the dollar and other
currencies by both local and foreign investors and businesses mainly to cover
import bills, others have blamed the currency weakness on trade with
China, as many traders are accumulating actual paper cash in dollars due to the
lack of effective transfer channels for the Yuan in Ghana.
Renaissance Capital has even predicted
another 5% to 10% depreciation before end of 2012.
To stem the situation, the Central Bank
raised interest rates by 250 basis points, starting from February, to halt the
currency from further weakening but that did not fully address the cedi-dollar
relationship.
President Mahama, delivering his ‘Critical
Policy Actions - September to December 2012’ in Accra Tuesday, said the bill
for non-oil import doubled and also put more pressure on the country’s foreign
exchange reserves.
“Last year we spent twice as much
foreign exchange on non-oil imports as the year before. This put pressure on
our reserves of foreign exchange as our import bill continued rising. This must
give us pause for thought.”
He
said in spite of the weakened cedi “we have made tremendous strides in bringing
down the rate of inflation to single digits.
“We have increased productivity and more
value-added in agriculture and improvements in road infrastructure, especially
in rural areas have meant more stable prices of food with positive consequences
for inflation.
“However, we remain a substantially
importing country, a situation which has consequences for our foreign exchange
resources.
The President said his economic team had
managed to “arrested the decline in the value of the cedi and it is gradually
stabilizing against major foreign currencies.”
“The
measures that the Bank of Ghana has instituted in respect of foreign capital
movements are legitimate, long-overdue exercise, and full compliance from all
financial institutions would establish a more stable and predictable regime for
the stability of the cedi.
He said he had instructed the Economic
Management Team to take immediate steps to consolidate and sustain
macro-economic stability by holding down inflation, halt cedi depreciation and maintain
discipline in government expenditure.
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