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23.01.2020 Article

Is The 40-Member FX Development Committee Necessary?

Is The 40-Member FX Development Committee Necessary?
LISTEN JAN 23, 2020

There is no need for long thesis and big grammar for this topic. It should be one of the easiest questions an Economics student in SHS can answer, a University student reading Economics or someone of higher learning should have answers spontaneously.

It is generally known that currency depreciation is sometimes dependent on the structure of a particular economy. Broadly speaking, currency depreciation can be as a result of the negative trade balance, Fiscal and Monetary Policies, inflation, higher interest rates, etc.

It is also on public record that the Ghanaian economy has a higher volume of imports or basically import-dependent.

An economy that is import-dependent is susceptible to currency depreciation. Any serious economist will know this.

It is preposterous and absolutely ridiculous that this government has shamefully constituted a 40 member committee of so-called experts to find answers to SHS questions. Is that not another way to milk the public purse?

Instead of searching for answers that are known, why not focus on solutions, because the fact is, implementation of these measures has always been the real problem.

For what is worth, and to aid or put differently guide the committee of experts in their search for answers and solutions to the falling cedi, some few measures have been proposed:

1. Reduction in imports

There should be a real strategy to reduce imports of goods such as sugar, rice, cooking oil, pharmaceutical products et al. that can be produced locally. There is a huge local demand for these products hence the higher demand for foreign currency for their importation, putting pressure on foreign currencies needed for these imports and forcing the cedi to the trail. The benchmarking at our ports should be handled such that imports do not become cheaper than our local goods. Otherwise, the pressure on the demand for foreign currency will keep surging.

As a long term policy initiative to stabilize and strengthen the currency, particular attention must be given to Agricultural to produce goods consumed largely in the country but imported from elsewhere. Consumer goods like rice, sugar, fish and other import substituted goods can be cultivated on a large scale for both local and international markets.

2. Strengthening Free Zones Authority

The Freezone is expected to promote exportation. But what do we realize today? The Freezones rather assist foreign companies with tax exemptions, they operate and after 5 years, fold up and come back in another form and enjoy the same tax exemption. There should be a clear policy to monitor the business set up under the Freezones enclave and the repatriation of the profits they make.

3. Controlling black markets

The black market is where people easily access foreign currency. Why not control it such that only the banks can change Cedis to foreign exchange. The dollar pricing in the system should be clamped down. This will make it unattractive for the dollar to be used for local business transactions. Alternatively, the government together with the Bank of Ghana can streamline and legitimize the activities of the black market so as to effectively monitor the flow of foreign currencies.

4. Reducing importation of second-hand goods

These second-hand goods have flooded our markets for quite some time. The import bill for these products is huge hence the high demand for foreign currency for their importation. This raises the Cedi equivalence to these foreign currencies. If such goods are banned from entering the market or reduced drastically, people will eventually develop taste for locals product and this saves us money.

5. Adding value to locally produced goods

There should be a conscious effort to add value which is of international standards to our local products before export. We have high Cassava production which can be transformed into other semi-finished or finished goods. Palm-nut can be processed into Palm kernel, Palm oil, etc on large scale. Fruits can also be processed. The government should assist people in these sectors and the setup factories and warehouses which will reduce post-harvest loses. All these will go a long way to increase our exports which will improve our trade balance. 6. Monitoring international churches with local branches

One can easily imagine the amount of money these churches make. They are required by their parent’s churches to repatriate proceeds to their headquarters. These monies are changed into foreign currencies putting extra strain on the demand of foreign currency and ostensibly accelerating the depreciation rate of our cedi.

A pragmatic and conscious government attitude should be adopted to check the activities of these churches.

These, in my opinion, will reduce the high demand for foreign exchange and stabilize the Ghana cedi.

The above points alone mean the number of the foreign exchange committee must be reduced by 70%.

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