“Economic Woes Mount: Ghana’s Cedi Plunges, Businesses Demand Swift Interventions”

The Ghanaian cedi’s persistent depreciation against major international currencies, particularly the US dollar, has been causing concern among businesses and consumers. The Ghana Union Traders Association (GUTA) and the Chamber of Automobile Dealership Ghana (CADEG) have warned that the situation is pushing up the cost of goods and services, making it difficult for businesses to stay afloat.

The Ghana cedi has been in a record-breaking weakening cycle, depreciating 14% against the dollar this year, driven partly by foreign exchange (forex) supply shortfalls. The local currency has fallen from GH¢11.97 to GH¢12.33 in the retail market in January to GH¢13.9000 to GH¢13.9140 in the interbank market as of yesterday.

According to the Bank of Ghana’s January 2024 Summary of Economic and Financial Data, the cedi started 2024 better than the same time in 2023, when it lost 20.6% to the US currency, and in 2022, when it depreciated by 30% against the dollar.

The businesses are urging the government to take urgent steps to address the situation. The cost of imported goods, including vehicles, parts, building materials, and hardware, has all been affected by the cedi’s depreciation.

GUTA President Joseph Obeng said that the cedi’s depreciation has created a “big mess” for the business community, especially the trading sector. “The purchasing power of the consuming public has been affected, thereby reducing the turnover of businesses,” he said.

CADEG National Chairman Eddie Kusi Ankomah decried the challenges facing the automobile industry due to the cedi’s depreciation. “The car dealership business is on the verge of collapse, and the reason is the dollar rate increasingly shooting up; it is unbearable,” he said.

Ankomah explained that import duties paid by importers on some vehicles have increased by nearly 19%. He stated that importers used to pay GH¢45,000 for every imported Toyota Prado vehicle in 2020, but that has now increased to GH¢229,000 this year.

Analysts say that unsustainable levels of public debt and fiscal deficit, depletion of foreign exchange reserves to less than three months of import cover, and high double-digit inflation since 2021 underlie the sharp depreciation of the Ghana Cedi.

To mitigate the impact of exchange rate fluctuations, business owners can utilise the Forwards Forex market and increase the use of local raw materials. Fintech companies can also be required to hold foreign currencies in Ghana’s balance sheet.

Banking Consultant Dr Richmond Atuahene suggested that revisiting laws allowing some Fintech companies to hold foreign currencies from hitting the country’s balance sheet could be a short-term measure to curb the rapid depreciation of Ghana’s cedi.

The Institute of Economic Affairs (IEA) has proposed 17 practical short, medium, and long-term measures to stabilise the Ghana cedi against the US dollar. The proposals include measures such as promoting Ghanaian ownership of the economy, industrialisation, acceleration of external debt restructuring, and enforcement of foreign exchange market regulations.

In conclusion, the persistent depreciation of the Ghana cedi is causing significant challenges for businesses and consumers. The government must take urgent steps to address this situation and stabilise the economy.