The President, Mr John Dramani Mahama, has stated that recent measures outlined to check the decline of the cedi may be painful but they are necessary to ensure the stability of the economy.
“These are difficult decisions to take, but they are meant to protect the integrity of the economy and show good results down the line,” the President said at a meeting with journalists in Accra Wednesday.
The President walked unannounced into the meeting the senior journalists were having with the Minister of Finance, Mr Seth Terkper, and the Minister of Trade and Industry, Mr Haruna Iddrisu, to explain recent happenings in the economy to them.
The meeting came in the wake of the recent upset in the foreign exchange market, which has caused the cedi to decline by about four per cent from January to date, mainly as a result of adjustments in the United States economy over the past year.
Economists and financial analysts have argued that the depreciation of the cedi comes in the wake of a 7.2 per cent depreciation in the Turkish lira against the dollar; 10.4 per cent in the Argentine peso, 4.7 per cent in the South African rand, among other currencies.
This is because many investors from the US economy are reversing their funds to that economy following the return of growth and investment avenues, which is causing emerging and frontier economies such as Ghana’s to experience waves of volatilities in their economic fundamentals.
The President likened the measures taken by the central bank to a bitter pill that must be swallowed and which would eventually inure to the benefit of the economy as a whole.
The Bank of Ghana (BoG), on February 6, 2014, announced several measures meant to discourage the use of foreign currencies, particularly the US dollar, for local transactions.
Access to the dollar is now restricted to foreign travel or offshore transactions, with cash amounts not exceeding $10,000.
President Mahama said the Attorney-General’s Department was working on the review of the stability agreement between the government and oil-producing companies.
He said to further curb the growing import bill, the government would include a provision in the review of the Procurement Law that would require companies to justify the importation of items for public projects for which substitutes were available locally.
The President estimated that about $1 billion was spent on the importation of only seven items per annum, although those items could be sourced or produced locally.
The items include rice, vegetable oil, sugar and frozen foods, whose importation amounted to about half of the foreign exchange the country earned from exporting cocoa beans.
President Mahama said the reduction in subsidies on utilities and petroleum prices was to protect the integrity of the economy and save some funds to support pro-poor interventions, adding, “We need to sustain the measures we put in place; we have to move the informal sector to modern times.”
Mr Terkper rejected suggestions that the economy today was weaker and less performing than it was three decades ago.
On the contrary, he explained that there had been structural changes in the economy from a predominantly agrarian one prior to 2006 to a service-led economy.
He said now the economy was characterised by increased cocoa output, oil and gas production, expansion in the services sector, improved infrastructure (ports, roads and so on), more transparent governance, as well as democratic dividend.
Mr Iddrisu said the BoG was right in instituting the measures to strengthen the cedi and asked for public support, instead of resentment, to ensure their success.