Lecturer casts doubts over gov fiscal strategy
4/25/2012 3:32:58 PM -
By: Issah Alhassan, Kumasi
Dr. kwabena Duffour, Finance Minister
A Chartered Accountant and Business Consultant, Mr. Kusi Boafo, making special reference to the recent dollar injection by the Bank of Ghana (BoG) as a means of stabilising the local currency, has cast doubts over the efficiency of the government's financial strategy.
Describing the measure as being a short term strategy that cannot be sustained, Mr. Boafo indicated that the government ought to adopt a more comprehensive approach to dealing with the increasing depreciation of the local currency against the dollar.
The Accountancy and Marketing Lecturer at the Kumasi Polytechnic noted that until a broad based strategy was adopted to plug all loopholes and ensure that enough dollars are retained on the market, the cedi would continue to lose ground against the major foreign currencies.
Citing the recent announcement by the BoG that it had injected about $1.2 billion into the system as a means of protecting the cedi from further depreciation, Mr. Boafo said the move was not economically prudent, since it would only go a long way to heighten tension and encourage people to lose confidence in the local currency.
He said the announcement would only create panic in economic circles, and encourage individuals with money to scramble for foreign currency, a development he described as 'dollar rush,' thereby pushing the cedi further into a downward trend.
Mr. Boafo observed that there was no need for the Bank of Ghana to have officially announced that it was injecting the amount into the system, stressing that apart from weakening the country's external reserve, it had also succeeded in creating unnecessary tension and apprehension in business circles.
'Now, the impression is that the cedi is not stable, so everyone is rushing for the dollar, and this continues to increase the daily downward fluctuation, resulting in the depreciation,' he noted.
He further observed that election uncertainties and the apparent lack of confidence in the security system had created capital fright, pushing more investors to relocate their capital from Ghana in fear of a possible reprisal, and this, according to him, had contributed to the continuous depreciation.
Mr. Boafo further noted that failure by the government to check illegal foreign exchange (forex) businesses, resulting in the laundering of the cedi on the black market, particularly, by Chinese businessmen in the country, had also contributed immensely to the weakening of the local currency.
According to him, Chinese nationals engaging in galamsey operations in the country were highly involved in the illegal forex business, by preferring to deal with black marketers, paying more than necessary for the dollar, and raising the competition above ordinary businessmen.
The Chartered Accountant indicated that as a long term measure, the government should curtail the level of importation, which, he said, had increased by 46% over the past three years that the National Democratic Congress (NDC) government assumed power.
'As at 2009, checks at the Ghana Ports and Harbour Authority indicated that Ghana imported merchandised goods and consumables at $7.4 million metric tonnes. This increased to $8.6 million in 2012, and further to $10.7 million metric tonnes,' he noted.
He has, therefore, called on the government to check illegal forex businesses in the country, especially, with the Chinese nationals engaging in galamsey operations, in order to reduce the pressure on the local currency and enhance its stability.