Economist and Head of Finance at the University of Ghana Business School, Professor Godfred Alufar Bokpin has attributed the cedi’s fall to the weak fundamentals of the economy.
According to him, the health of the cedi is a reflection of the real sectors of Ghana’s economy which are currently weak and unstable.
Figures available to Citi Business News from the Bank of Ghana as well as Forex bureaus across the country show that the cedi has depreciated by about 5.4 percent between January and February of this year alone on the interbank forex exchange market and as much as 6.72 percent in the same period across forex bureaus in the country.
Speaking at post budget analysis programme organized by the Ghana National Chamber of Commerce, Professor Bokpin warned that the instability of the cedi should tell government that the increase for import goods must be reduced.
“What is happening to the cedi is a true reflection of what is the fundamental level of our economy, the structure of our economy. So you may even add more heads to the currency notes against one head and it will not work, because the competition is not [about]the number of heads, it is about what is backing your currency,” he said.
He explained that the currency of a country to large extent determines the value of goods and services, hence the macro stability.
He stated that with Ghana’s high level of imports, the cedi will always be under pressure since it will trade among other currencies backed by the value of their exports.
“What is backing the cedi?, it’s a small open economy where more than 70 percent of business input cost in this country is imported. How do you expect the cedi to behave differently? Certainly not, until we look at the fundamentals, the cedi will continue to do what it has been doing. It has to adjust to reflect the new equilibrium. It is as simple as that,” he said.
By: Lawrence Segbefia/citibusinessnews.com/Ghana