Prof Godfred Bokpin is an economist
Economist and Professor of Finance at the University of Ghana, Prof Godfred Bokpin, has noted that the stability of the local currency is far important for the economy and businesses than its appreciation.
He noted that the cedi stabilising at GH₵10 was predicted by industry players earlier.
According to him, it is more important to have currency stability instead of aggressive fluctuations.
“It’s also good that there’s now some level of clarity that yes, we need to stabilise beyond the aggressive strengthening. We need to stabilise it. Stability is preferred over swings, whether appreciation or depreciation. It’s neither good for businesses nor central banking in the first place,” he was quoted by myjoyonline.com.
Prof Bokpin explained that economic stability does not mean a fixed exchange rate, but rather predictable and moderate variations.
“Of course, we also do know that stability in economics is not the same as the same price or fixed price over time. We still expect that there will be some kind of variation in the rate, but it should not be significant enough to cause disruptions or uncertainty when it comes to planning,” he noted.
According to him, the Central Bank should have communicated a target earlier to allay fears and regulate the market.
He described the president’s mention of GH₵10 and GH₵12 as the true value of the cedi as the right path.
“I have indicated much earlier that the central bank was targeting the exchange rate. They didn’t want to communicate that to the market at the initial stage, so it was not just a more recent meeting where they decided on it. They knew largely where they were heading,” Prof Bokpin added, the report said.
The economist further noted that the cedi’s appreciation was being manipulated by the Central Bank, and not solely due to forces of demand and supply.
He also added that the rate of appreciation was too aggressive and did not make room for business owners to plan properly.
“That is why we said that what we witnessed in terms of the strengthening of the local currency was not just the forces of demand and supply. There were some interventions to cause the strengthening.
“We confirmed that the rate of facilitation was too aggressive to enable planning and the entire economy to adjust to the strengthening of the currency. And to that extent, you could not describe that as stability. That was more of a disruption. The disruption could cause negative or positive effects, and it was very difficult for people to play along or even plan. It was quite unsettling,” he added.
SSD/AE