The performance of the Ghanaian cedi leaves much to be desired. The cedi seems to be wrongly diagnosed thus making all treatments (solutions) fruitless no matter the dosage?? Or the dollar (bacteria) has gained resistance to the solutions (antibiotics)?? Either way the dollar should not be made to enjoy and live buoyantly whiles it ought to be in jail. It will not be far from right to say managers of the economy have run out of oil in surmounting the actual causes of the problem.
In proffering my solutions to the problem, let's identify and analyze the problems critically.
Every system has four basic components. They are: Structure, input, process and output.
The structure of the Ghanaian economy which is import dependent makes the Ghanaian cedi susceptible to the dollar. The structure, which has been in existence since Sir Frederick Gorden Guggisberg give us a clue on how weak it has become. Again the Ghanaian cedi that laid the foundation for the structure is not a legal tender beyond Ghana. The plummeting of the cedi can be solved if the current structure is replaced by an export-dependent structure.
The input, defines what we do or not in keeping the economy strong or weak.
In Ghana, hospitality players, companies and some schools quote prices and fees in dollars. Such transactions whether paid in dollars or its cedi equivalent means high demand of dollars either from citizens or the companies since their profits will only leave the shores of the country in dollars thereby creating shortage of dollars resulting in the plummeting of the cedi.
Moreover, government spends chunk of tax payers money which is cedi denominated in servicing 60% of our national debts with interest which are foreign loans. This means more cedis must be changed into dollars for servicing loans thus putting pressure on the available dollar in the system. Don’t forget, fewer dollars in the system means more cedis needed for it.
In the area of taxes at the sea port, high charges on goods and services discourage many business men and women in our neighboring countries from using our ports. Foreign cash (dollars) vanishing into thin air. Ghanaian business men and women are unfortunately slapped with the same high charges which means more cedis virtually slipping through their hands in exchange of dollars in circulation.
Multinationals in Ghana though invest in the economy by injecting dollars. Unfortunately most of their profits are kept in foreign banks. The rare pressure on the cedi occur when these nationals exchange their cedis into dollars thus putting pressure on the economy.
what really processes the economy??? Monetary Policy and Fiscal Policy as an internal factor, and external factors which we have no control over are the main factors that processes all inputs.
Monetary policy as a set of economic policy that manages the size and growth rate of money supply in an economy are implemented through different tools including changing the amount of cash circulation in the system. Past governments relied on this solution but mitigated the problem of the cedi other than rendering long term solution.
Fiscal policy which defines how managers of the economy adjust spending (expenditure) bearing in mind the revenue at their disposal. Over the years most gov't fail to keep up with this policy especially in an election year. The solution to this problem has been initiated by the Nana Akufo-Addo led administration. Enacted law restricting future fiscal deficit above 5% is the surest way. If for nothing at all, the government is forced to spend within the budget to avoid reckless borrowing.
The output is the manifestation of the economic status. We reap only what we sow.
In conclusion, there is the need for AU or Ecowas member states including Ghana to build production capacity, trade among themselves in one currency.
Partnership with member states with a comparative advantage on mineral resources must join hands in order to determine prices of such minerals.
I will end with a quote from Dr. Kwame Nkrumah, “action without thought is empty, and thought without an action is blind”.
The Author is a former student activist of the University of Ghana. His name is Samuel Ankomah but is a conscience loyalist.
Disclaimer: "The views/contents expressed in this article are the sole responsibility of the author(s) and do not neccessarily reflect those of Modern Ghana. Modern Ghana will not be responsible or liable for any inaccurate or incorrect statements contained in this article."