Dr. Mahamudu Bawumia
Dr. Mahamudu Bawumia, the 2012 vice presidential candidate of the New Patriotic Party (NPP), has exposed what he considers to be a ‘deliberate attempt by officials to massage the true state of inflation and depreciation of the Ghanaian cedi.’
According to the ace economist, while the local currency is trading at an average of GH¢3.8 to the dollar among banks, official figures had deceptively pegged the exchange rate at GH¢3.03 in what Dr. Bawumia alerts is an attempt by the Bank of Ghana (BoG) to ‘fix’ the exchange rate.
‘The BoG,’ he said, ‘would have us believe that since June 17 this year, the exchange rate of the cedi to the US dollar has remained unchanged at some GH¢3.03 per US dollar, and has thus, remained fixed at this rate over the last three months.’
Bawumia said, ‘A simple look at the interbank market exchange rates indicates that the cedi has not only been depreciating daily, but is currently trading between GH¢3.7 and GH¢4.1 per dollar, with an average of some GH¢3.8 per US dollar’.
The Financial Times of London, Reuters, CNN and other financial analysts, have estimated the cedi’s depreciation at over 40% in the first half of 2014. But the government claims the cedi has only fallen 22.9 %.
‘It is on the basis of this fixing of the exchange rate by the BoG that the Minister of Communications, Dr. Omane Boamah, on behalf of government, claims that the cedi has only depreciated by some 22.9% in 2014 and not 40%… This claim by the government was a rather embarrassing rebuttal because the cedi has actually depreciated by some 40% in 2014—using the interbank rates or the Forex Bureaux rates—and the whole world knows it,’ Dr. Bawumia charged in a statement released on Thursday.
Statistical Service’s Massage
He has also sounded an alarm on the Ghana Statistical Service (GSS), which claimed inflation rate between January and July 2014 increased by only 1.5% (13.8% to15.3%), even though the major determinants of inflation in Ghana—petroleum and utility prices—had increased double-fold during that period.
‘Unfortunately, this data does not capture our collective experience. Almost every individual, household, business, would tell you that prices are increasing much faster this year than has been observed in many years. So why is the Statistical Service data not capturing this?’ Dr. Bawumia queried.
‘Something is not quite right and the GSS should take another look at the numbers and procedures to make sure they are capturing price developments adequately. In response to the economic fundamentals, interest rates on the money markets have also increased significantly this year,’ Dr. Bawumia noted.
‘The statistics on exchange rates from the Bank of Ghana and inflation from the GSS are in my humble opinion, not credible. Any shopper at Makola in Accra, or markets in Kumasi, Akatsi, Techiman, Cape Coast, Wa, Bunkpurugu, Bolga, would laugh at you if you tell them that average prices of food and non-food items have gone up by an average of only 1.5% so far in 2014 and that prices are not increasing as much this year as they were last year (2013),’ he underscored.
‘We need reliable data to manage the economy prudently. If the data is wrong, important policy decisions based on such data would be wrong. It is therefore important that when we observe such situations we point them out so that corrective actions can be taken to save all of us from suffering the adverse effects of wrong policy decisions based on such unreliable data. I know that I risk sounding like a broken record on this issue, but a broken record is always better than a broken economy,’ he concluded.
Dr. Bawumia, who was formerly the Deputy Governor of the BoG, has been a strong critic of the economic management style of the John Dramani Mahama administration. He has made a number of bleak economic predictions about the directions of the economy.
Many of these predictions have to a large extent, come true, including a prediction that at the rate of economic management, the Mahama administration would be forced to go cup-in-hand to the International Monetary Fund (IMF).
By Raphael Ofori-Adeniran
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