Reuters reported that the Ghana cedi has so far declined by more than 14 percent against the dollar this year, touching fresh lows on strong demand for the greenback by local telecom and manufacturing firms.
On date of this article the cedi hovered around 1.88 to the US Dollar and both business and consumers are feeling the pinch.
According to the he Association of Ghana Industries (AGI) the rapid depreciation of the cedi over the first quarter of 2012 has led to a high level of taxation through continuous increases in import duties charged mainly in foreign currencies.
According to Nana Owusu-Afari, President of AGI, “This is a major concern to industry as increase in taxes raise cost of production of local producers.”
In early May Finance Minister Kwabena Duffuor told Reuters that the Ghana government expects the local cedi currency to stabilise by mid-May as its latest measures, including the re-introduction of short-term bills, kick-in.
It is yet to be seen if any of these measures had a dramatic impact on the value of the cedi and if it is indeed stabilising.
Last week Mr Jacob Brobbey, a Barclays Bank trader, said, “Market liquidity remains poor with no trades seen going through,” adding that the dollar-cedi rate remained indicated at 1.9040/65 – another record low for the Ghanaian currency.
The Government of Ghana also came under attack from the opposition parties and was blamed for the cedi’s rapid depreciation.
According to the running mate to the flagbearer of the New Patriotic Party (NPP), Dr Mahamudu Bawumia, the situation with the cedi depreciation cannot be blamed on speculative behaviour but bad policies adopted by the government in the management of the economy.
He said these bad policies have caused the cedi to become the weakest performing currency in Africa.
“The current rapid depreciation of the cedi is a sign that the fiscal and monetary policies are not appropriate. Monetary policy decisions over the last year, for example, have been based on the assumption that we have single digit inflation,” he said.
Food Security Ghana (FSG) has on numerous occasion questioned the accuracy of statistical data in Ghana. Dr. Mahamudu Bawumia added to this by saying that if that statistical figure is not right “then it means that monetary policies would have been based on wrong information which resulted in the premature easing or reduction in interest rates. This will make cedi denominated assets less attractive and allow people to prefer to move into dollars,” resulting in a fall of the local currency.
Moving on to the agricultural sector Dr. Mahamudu Bawumia said it is clear that since 2008 the growth rate in agriculture, where most people depend on for their livelihood and industry, have declined.
“How are we going to create jobs when the critical sectors of the economy like agriculture are not growing? The jobless growth we are seeing in Ghana under this government is therefore not a mystery. You cannot create jobs when the critical sectors have significantly declined.”, he said.
The impact of the declining value of the cedi has also started filtering through to consumers who are already strapped for cash and finding it difficult to survive.
Despite many promises by the government to reduce Ghana’s dependency on food imports, the supply of major staple foods such as rice and poultry are still dependent on imports.
In addition agricultural inputs such as fertiliser and capital goods are also import dependent, and the combined effect of this is that food in Ghana is becoming more and more expensive by the day.
While the government of Ghana is making promises and excuses and the opposition is continuing with the blame game, the food security situation of many Ghanaians is declining as fast as the value of the cedi.
The big question is who these suffering Ghanaians are going to believe when it comes to the general election in November 2012.