Business News of Thursday, 18 June 2015
The Chief Executive Officer of Dalex Financial Services, Ken Thompson is predicting that the cedi will continue to fall against major trading currencies unless there is a deliberate effort to change the economy’s import dependency.
Ken Thompson said Ghana’s alcoholic economy has allowed the demand for the US dollar to outstrip supply hence the free fall of the cedi.
“Ghana has an alcoholic economy… We are addicted to foreign goods and services. Because of that addiction, there is a huge demand for dollars. The demand for dollars is higher than the supply, so consequently the cedi’s fall,” he explained.
Pressure has been mounting on the Ministry of Finance and the Bank of Ghana to halt the free fall of the currency after it depreciated by about 40% against the dollar in 2014.
Sharing his perspective on the Citi Breakfast Show on Thursday, Ken Thompson insisted that the only way the cedi could be saved will be to export more products instead of importing.
“We’ve been there several times; we went to the IMF, we had operation feed yourself, we had HIPC and we are back to the IMF. So for me, the cedi falling is a simple demand and supply issue. What we have to do is to increase our supply of dollars and that will solve the problem. The only way to solve that is to export more. We have to export!” he stressed.
“In February this year… I said the cedi was going to completely fall, and I said the IMF target will be missed and reading between the lines, it looks like the target has been missed.”
“What I’m hoping for is that, the Ministry of Finance will be able to negotiate with the IMF team so that it will release the tranche of dollars that was expected. In addition, that will also help to release donor funding… then they will bring in dollars.”
The banker further emphasized that, “the cedi will continue to decline unless we change the demand and supply situation.” The Bank of Ghana thus issued some directives to halt the free fall of the cedi but yielded little or no results.
Meanwhile, a private legal practitioner, Dr John Ephraim Baiden; has dragged the Bank of Ghana to court over the cedi’s woes praying the court to compel the Central bank to reverse the trend. The cedi currently stands at 4 cedi 35 pesewas against the dollar and may get worse according to some economists.