The Cedi Crisis: Gov’t Divided…Over BoG Measures?
As the nation plunges into its worst currency crisis in nineteen years, intelligence information suggests a deep-seated resentment and division within the Mahama-led government over the mode of combating the worsening situation.
This paper has learnt that the government is deeply divided over the recent bout of measures introduced by the Bank of Ghana (BoG) to stem the tide of the Cedi slide and restore hope on the angst-ridden Ghanaian public and businesses.
According to the information available to this paper, President Mahama, his vice-President Paa Kwesi Amissah Arthur, the Governor of the Bank of Ghana and his two deputies and the Finance Minister are on one side and the rest of the government is on the other side.
The National Democratic Congress party (NDC) and its functionaries is also said to be kicking against the draconian measures, which many party faithful have described as revolutionary and anti-private business.
According to the BoG measure “all transactions in the country are required to be conducted in Ghana Cedis, which is the sole legal tender.”
“No cheques or cheque books shall be issued on the Foreign Exchange Account (FEA) and Foreign Currency Account (FCA).
“Cash withdrawals over the counter from FEA and FCA shall only be permitted for travel purposes outside Ghana and shall not exceed US$10,000.00 or its equivalent in convertible foreign currency, per person, per travel.
“Authorised dealers shall not sell foreign exchange for the credit of FEA or FCA of their customers.
“Transfers from one foreign currency denominated account to another are not permitted.
“All transfers outside Ghana from FEA and FCA shall be supported by relevant documentation.
“No bank shall grant a foreign currency denominated loan or foreign currency linked facility to a customer who is not a foreign exchange earner.
“All undrawn foreign currency denominated facilities shall be converted into local currency with the coming into effect of this Notice. However, existing fully drawn foreign currency denominated facilities and loans to non-foreign exchange earners shall run until expiry.
As a result of these measures and others below, many ministers in the Mahama administration and Chief executives of state-own enterprises are said to have received numerous complaints from both local and international businesses mainly exporters and importers.
One government official told this paper on condition of anonymity that business owners or managers of businesses under his outfit have been inundating him and his office with complaints that the measures are derailing their efforts and making their work very difficult.
“They are counterproductive and akin to the military era where everything is controlled by the central government. If that happens, businesses cannot flourish and there could be danger to the political stability of this country,” another government official told The Al-Hajj also on condition of anonymity.
As at the time of going to press yesterday, President Mahama and his team of ministers and economic advisers, including the Governor of the Bank of Ghana were locked in an extraordinary cabinet meeting at the Flag Staff House and brainstormed on the possible revision of some of the draconian measures in order to minimize the damage to the national economy.
A Cabinet press statement signed by the Minister of Information and Media Relations, Hon Mahama Ayarga yesterday just before press time endorsed the Bank of Ghana measures to end the dollarization of the national economy.
However, the statement called for more clarity on the BoG directives in order to assuage numerous concerns raised by a cross-section of the Ghanaian public.
The Local currency, the Ghana Cedi has since the beginning of the year been going through a sustained and its deepest depreciation since 1994.
Conservative estimates put the Cedi depreciation against the US Dollar to almost four per cent since January this year. This means the currency is depreciating by about one per cent every week.
This comes on the back of the annual depreciation of about 17 per cent last year.
The Ghanaian economy has been buffeted by twin deficits in both 2012 and 2013 following political uncertainty in the election year followed by a keenly contested legal battle on the 2012 election engineered by the opposition New Patriotic Party (NPP).
The fiscal deficits in both 2012 and 2013 are 11.8 per cent of GDP and 10.2 per cent of GDP respectively.
On the other hand, the current account deficits for 2012 and 2013 are 12.1 per cent of GDP and 12.3 of GDP respectively.
These slippages together with mounting national debt which currently stands at about USD23bn are mainly the result of the current currency crisis the nation is facing.