The only way managers of the economy can rescue the cedi from its repeated slump against major trading currencies, especially the US dollar, is for them to embark on heavy industrialisation and get Ghanaians to consume their own products, Senior Economist at the University of Ghana, Dr. Ebo Turkson, has said.
His comments come on the back of the cedi hitting GH¢5 to US$1 this week – representing a 7 percent depreciation since beginning of the year.
In an interview with the B&FT, Dr. Turkson said depreciation of the cedi can be largely attributed to over-dependence on importation, as the macroeconomic indicators of the country remain relatively strong – hence the need to make the economy productive to shore-up the cedi.
“Our macro-indicators are alright. We have a trade surplus and inflation is low, among others. So, given these, why shouldn’t our cedi be stable? Of course, the fundamental problem has always been the structural bottlenecks. We are too import-dependent and as a country; we need to decide that we are going to consume Made in Ghana goods.
This is not necessarily directed at shunning imported goods, but rather creating demand for what is produced locally. There are a lot of potential benefits in that. Nigeria decided that they are not going to consume imported rice, they will consume their local rice to create demand for it – and they have done it. But what do we do in Ghana? We prefer the imported rice over local ones,” he said.
Government, he urged, should take seriously its policy interventions like the One District, One Factory and Planting for Food and Jobs, as they have the potential to reduce the heavy importation of almost every essential good into the country.
If this is not done, he said, no matter the amount of dollars the central bank injects into the economy, the local currency will not remain stable.
“The One District, One Factory and Planting for Food and Jobs are very important policy interventions we need to focus on, because these are some of the ways we can reduce our reliance on imported goods. We must add value to what we produce, export higher value-addition products, and then also have more import substitutes that are produced locally.
“So, we should focus on industrialisation; we should focus on adding value to our products so that we can export. We need to also diversify and expand so that we don’t only rely on our traditional exports – of which we do not have control over their prices, and where every now and then we are at the mercy of the global market.
“Otherwise, the central bank will intervene and the cedi will become relatively stable – but when the external forces set in, which we have no control over, we will be left vulnerable,” he said.
He further urged the central bank to enforce regulations which will wipe the black market out of the system or make it unattractive; as, he argues, it is one of the main causes of cedi-depreciation.
“The black market is also part of the reasons. If you go to countries like South Africa, you cannot just change into a foreign currency like that. You need to show your passport and some documentation before. And the data that is collated by the forex bureaux are real time data for the central bank – but that is not so with the forex bureaus in Ghana.
“They can do a lot of black-market activities which the central bank will not be aware of. So, the central bank needs to enforce its regulations well, so that such activities do not thrive in the country,” he added.