Gov't Blows US$1.1bn. On Cedi Free Fall
FROM THE beginning of this year to date, an amount of US$1.1 billion dollars has been spent by the Bank of Ghana to shore up the local currency, BUSINESS GUIDE has learnt.
The phenomenon, according to experts, has been accentuated by the lack of business confidence on the part of investors and the belief that government will overspend this election year.
An economist, Dr Joe Abbey, whom this paper spoke to on the issue, said the activity could throw the economy out of gear if not checked since it had started witnessing the onset of capital flight - where foreign investors clear off their investment to their home countries.
The situation has further mounted pressure on the cedi, hence its free fall.
The cedi depreciated at a much faster pace of 5.9 percent in January 2012 compared to 1.9 percent in January 2011.
Currently, the cedi rate to a dollar is GH¢1.72.
Paa Kwesi Amissah Arthur, Governor of the Bank of Ghana, has explained that the Ghana cedi has had to cascade mainly on account of investors' strong demand for foreign exchange among other speculative activities.
Attempts to get officials of the Association of Ghana Industries to respond to the situation was unsuccessful but George Kweku Ofori, President of Ghana Union Traders Association (GUTA), has noted members of the association were going to embark on a demonstration to register their displeasure over the depreciating value of the cedi.
According to him, the high exchange rate was greatly affecting operations of GUTA members since most of them imported goods.
The automotive spare parts industry has also not been spared the ordeal. In the past few years the industry has grown enormously, while creating jobs at the same time.
Clement Boateng, spokesman for the Abossey Okai Spare Parts Dealers Association, speaking to this paper said the industry used to be a very lucrative one, but the fast depreciation of the cedi was responsible for the predicament of most spare parts dealers.
By Samuel Boadi