‘Ghana cedi is the best performing currency against US dollar’
– Bawumia
The cedi is the best performing currency in the world against
the US dollar. This is according to Vice President Dr. Mahamudu
Bawumia.
The cedi depreciation, which has been a major problem in the
country over the years, has even led to the inauguration of the FX
Development Committee to tackle issues relating to the depreciation
of the cedi and find solutions to them.
The cedi last year depreciated by more than 12.7 percent, the
worst performance since 2015 when the cedi depreciated by more than
14.6 percent.
But commending the governing New Patriotic Party (NPP) for the
good work done in sustaining the cedi at the Town Hall meeting held
at Kumasi on Tuesday, the Vice President said there has been a
major change in the cedi’s performance since the NPP got into
power.
“Indeed for us, if the cedi is to match what the NDC record
is, in terms of the nominal change in the currency, we’d have to do
a quadruple jump which means we have to move from 4 close to 16 to
be able to match their record. We have only gone from 4 to 5.35 and
they are making noise.”
“So thankfully, this year, the cedi is performing quite well
and reflecting the fundamentals and currently, the cedi is the best
performing currency in the world against the US dollar. As we speak
this year, with an appreciation of 3.4%, the data shows that
Ghana’s macro-economic fundamentals are strong,” he
indicated.
Bawumia on cedi depreciation
Dr. Bawumia at a town hall meeting in 2019 similarly took a
jab at the NDC for an explanation of the cedi depreciation.
The opposition party had trumpeted a popular quote from Dr.
Bawumia that “if your fundamentals are weak, the exchange rate will
expose you” to show that the NPP government had also failed in the
management of the cedi.
But the Vice President insisted that the fundamentals are
strong and described such arguments as warped.
BoG to auction US$715 million
As part of plans to fight the depreciation of the Ghanaian
currency, the Bank of Ghana (BoG) announced that it will auction
US$715 million in Forward Foreign Exchange Auctions for the year
2020.
Per the schedule released by the Bank of Ghana, the central
bank will have the highest auction of 80 million dollars each in
January, February and March 2020.
The move to auction such an amount of US dollars is expected
to help arrest, to some extent, the perennial depreciation of the
cedi.
FX Development Committee
The Finance Ministry inaugurated a committee to look into the
causes of the depreciation of the cedi and propose solutions to the
problem last month.
The establishment of the committee, named the FX Developments
Committee, is in fulfilment of a promise made by the ministry last
year to constitute a bi-partisan committee to look into the problem
and help address it.
According to the ministry, the committee will work to
complement the efforts of the Bank of Ghana in curtailing the usual
poor performance of the cedi against other major foreign
currencies.
The committee will also review the current forex regime,
identify the inherent constraints in the system and offer workable
alternatives by way of policies and programmes which potentially
would reduce FX risks in the economy.
QUESTIONS
1. How is Ghana positioned to increase the value of the
cedis?
2. Do you think there is a conflicting role between BOG and FX
Development committee? (Please give reasons for your answer)
3. Controls on imports and/or foreign exchange dealing has
been one of the arguments used in maintaining fixed exchange rate.
What problems might arise if the government were to
adopt this method of maintaining a fixed exchange rate?