The Minority in Parliament has asked Vice President Dr. Mahamudu Bawumia to provide answers to 5 questions over the depreciation of the cedi.
The Minority at a press conference today [Wednesday March 20, 2019] said the Ghanaian economy is currently becoming more vulnerable and externally unstable due to declining net international reserves and the fast rate of depreciation of the Ghana cedi. It has been reported on various media platforms, both locally and internationally, that the cedi/US dollar exchange rate is expected to reach about GH¢6 per dollar by the end of the third quarter of 2019.
In the view of the Minority the poor performance of the Ghana Cedi comes on the back of huge oil revenue inflows. Ghana has become a net oil exporter following the coming on stream of two additional oil fields worked on by the Mahama Administration.
‘’Indeed, in the last two years, the NPP Government has received the equivalent of GH¢6,825,548,529.61 ($1,474,958,169.38) in foreign exchange but has still not been able to augment its net international reserves beyond end-2016 levels. Nor has the NPP government sustained the stability of the cedi. In addition to the receipts from oil revenue, the NPP government has also benefitted from forex inflows from the controversial Franklyn Templeton Bond, and a series of Eurobond issuances over the same period. Table 1 gives an indicative idea about how much this government has received in oil revenue and yet has wasted it on unproductive expenditure,’’ Cassiel Ato Forson, the Minority’s Spokesperson said.
He then asked the Vice President to answer the following questions: ‘’ Now, the head of the government Economic Management Team, Dr. Bawumia must provide answers to the following five (5) questions: Question 1: Why would an independent central bank with focus on price stability decide to reduce the monetary policy rate against its own research findings that US policy normalization is strengthening the US dollar and causing investors to move funds away from emerging economies and that upward adjustments in domestic prices of petroleum products are likely to affect transport and utility prices?
Question 2: Why would an independent central bank, with a focus on price stability, decide to lower the policy rate in the face of dwindling net international reserves and a rising interest rate abroad?
Question 3: Why would an independent central bank with focus on price stability decide to reduce the monetary policy rate in favour of growth, which has been projected to be higher than the previous year’s, while the local currency is under pressure?
Question 4: Why would an independent central bank with a focus on price stability decide to lower the policy rate in the face of excess liquidity in the banking sector emanating from banks increasing their minimum capital by over 100 percent, while the local currency is fast depreciating?
Question 5: Clearly, an economy cannot be externally unstable and internally stable. How can a rapid exchange rate depreciation be accompanied with a single digit inflation rate as captured by the posted macroeconomic indicators? Indeed, the recent monetary policy easing by the Bank of Ghana is nothing more than populist approach and is a key factor fuelling the recent exchange rate depreciation.”
IMPACT OF THE CEDI DEPRECIATION
The Minority further indicated that, ‘’the rate of depreciation of the Cedi has attracted serious public discourse and generated discontent in the business and investor communities. It is only proper that we bring to the notice of the good people of this country the issues surrounding the recent depreciation of the Cedi and its impact on the economy. The subsequent sections discuss the causes of the cedi depreciation and its impact on GDP growth, inflation, the public debt, and its overall implications for the fiscal balance.
On impact of growth the Minority said: ‘’ It is very sad that the usually outspoken Vice President has gone into ‘self-imposed exile’ on economic matters perhaps following the massive public backlash he has received which has made him the butt of all jokes in both traditional and social media. His misleading claims about the economy while in opposition and the propaganda-laden lectures organized to convey the impression of some exceptional knowledge about economic management on his part, have combined to expose him to public ridicule in the wake of the disastrous fall in the value of the Cedi.’’