Economist Blames Excessive Imports For Cedi Fall

A senior economist at the University of Ghana has said the central bank must combine short-term measures to deal with the cedi fall with a reliable strategy to deal with decades-old structural challenges stagnating Ghana’s economy.

According to Dr. Priscilla Twumasi-Baffour, tackling structural challenges like excessive imports and exporting goods without value addition would prove a more robust strategy to keep the local currency strengthened against the dollar and other major trading currencies.

“We basically import everything,” she said during the Cedi Forum on Thursday, September 13, 2018, which discussed issues concerning the plummeting cedi.

The forum, organised by Joy FM on the theme “Ghana’s Depressing Cedi Depreciation: How Do We Stem the Tide?” brought together renowned economists and politicians.

The local currency continued its rapid nosedive since the start of September, losing 0.9 per cent of its value to the dollar to sell 4.8378 on Thursday.

The cedi has lost almost 7 per cent of its value against the strong dollar since the beginning of the year, prompting fears of dire consequences to the Ghanaian.

A Senior Research Fellow at the Institute of Fiscal Studies (IFS), Dr Said Boakye, who also spoke at Thursday’s enlightening forum, has, meanwhile, said the cedi's challenges would ease quickly – allaying fears of a possible meltdown of the economy as a result.

Photo: Dr Said Boakye
On what the Bank of Ghana can do to salvage the situation, Dr Twumasi-Baffour told a packed audience at the Economics Department of the University on Thursday evening that Bank of Ghana must continue with the occasional short-term measures and regulations to ease the pressure on the cedi, but government and its agencies must focus also on the bigger picture.

Since the beginning of September, the Bank of Ghana has pumped in a little over $200 million into the economy to save he struggling cedi. That has not helped the situation very much.

Dr Twumasi-Baffour thinks this measure and other short-term regulations are good but the real solution to the cedi’s recurring woes lie a little deeper.

“When governments launch policies such as 'Planting for Food and Jobs, 'One-District-One-Factory'…these are ingenious policies that when we put our heads to them and we make them work; we know we can add value to our agricultural produce. If for nothing at all, we can feed ourselves and ease the pressure on the cedi [when we import].

“If we can produce certain basic goods that we consume locally, it means that we will not have to import those goods. Now it has gotten so ridiculous to the point that people are even importing water. Countries that have developed have gone through the mills. They have developed what is locally theirs to make them competitive,” she said.

Listen to Dr Twumasi’s submissions at the forum in the audio link below.