The Chief Executive Officer of Dalex Finance Company and Leasing Limited, Mr Kenneth Kwamina Thompson, last week stunned a gathering of marketing experts, accountants and economists when he stated categorically that the cedi should be allowed to fall further against the major foreign currencies.
“The cedi must be allowed to fall because it is overvalued,” he said, in what is expected to generate a debate as to whether the reasons adduced by him are cogent and in the interest of the country or not.
Speaking on the topic, “In a Volatile Economy, “Fortes Fortuna Adiuvat” at a lecture dubbed “An Evening with Keneth Kwamina Thompson” in Accra last Friday he said there was the need for the government to allow the shoring currency find its “true value on the market” and also help change people’s attitude towards imports in the country.
The lecture was under the auspices of the Chartered Institute of Marketing Ghana (CIMG). “When the cedi is allowed to fall, people would import less and this would force citizens to buy more goods produced within the country,” he argued.
According to him, there were many products that could be produced in the country to boost the economy and create more jobs for the people.
He mentioned for instance, rice, poultry, fruit juices, tooth picks among many other things that could be produced in the country to meet the demand for local consumption while exporting the excess to raise foreign capital.
Ghana has an Alcoholic Economy
Mr Thompson said the country’s economic behaviour was an addiction to foreign goods and services and “as an alcoholic you get addicted to ‘Apio’ or Vodka”.
He said the evidence of the country’s ‘alcoholism’ was in the rate at which the currency had moved over the last few years.
“The price of the currency is supply and demand and from 1998 and 2006 we depreciated by 309 per cent, 2007 to 2014, we depreciated 167 per cent. Hence from 1998 to 2014, the value of the currency had depreciated to almost 1000 per cent and this is the evidence of our alcoholism,” he explained.
Mr Thompson said in an attempt to wean off such an addiction, governments on succession introduced initiatives such as the Operation Feed Yourself (OFY) in 1972, the Structural Adjustment Programme (SAP) of 1983, and the Heavily Indebted Poor Countries (HIPC) initiative of 2000.
However, these initiatives he said did not last because at each session, “we tried to rid ourselves of foreign goods and services by finding resources within ourselves to make our economy better but then we go back again and resort to foreign goods and services”.
Mr Thompson said as ‘alcoholics’, “in 2013 the hangover started; the cedi was rapidly depreciating, there was a freeze on government spending, and there was an absolute total loss of business confidence”.
The Way Forward
Therefore, Mr Thompson said any attempt to combat our addiction through bans and restrictions would not work saying, “We are addicted to foreign goods and services and this then brings to the creation of a parallel market where we only take in goods but are not able to give out”.
He further explained that even with the sanctions, people would find a way to do business as this was going to fuel corruption, and create a situation where taxes won’t load up because everything would go underground and in the end the “the market will win because the market always wins”.
He, therefore, called for the promotion of exports as this was the only way the country would be able to sell and bring in the dollars that was needed to either buy more foreign goods or try to correct the market.
Some of the speakers at the forum, though stunned earlier, later backed his call and urged a change in attitude towards foreign products to enable the country to boost the economy.
They unanimously agreed that the cedi was overvalued and needed to fall to find it level.
His proposition is expected to anger traders who usually suffer when the cedi loses its value.
Already, they have put the government under severe pressure urging it to halt the decline.
Meanwhile, on the flip side, a falling cedi will help exporters, a situation which should help encourage all local manufacturers to produce more to meet local demand and also export the excess.