Businesses Demand Urgent Action from Government to Stabilize the Ghana Cedi
Businesses in Ghana are calling on the government and the Bank of Ghana to take urgent measures to stabilize the cedi, which has depreciated significantly against the dollar, impacting costs and business sustainability.
Manufacturing, commerce, and other sectors impacted by cedi depreciation call for immediate measures from the government and the Bank of Ghana.
Companies across various sectors in Ghana, including manufacturing and commerce, have issued an urgent plea to the government and the Bank of Ghana (BoG) to intervene and halt the ongoing depreciation of the Ghana cedi. The persistent fall of the local currency against major international currencies, particularly the US dollar, is significantly impacting businesses and escalating consumer costs.
The Ghana Union Traders Association (GUTA) and the Chamber of Automobile Dealership Ghana (CADEG) highlighted that the weakening cedi is inflating the cost of goods and services, jeopardizing the sustainability of businesses. The cedi has depreciated by 14% against the dollar this year alone, driven by forex supply shortfalls. As of yesterday, the interbank market saw the cedi trading at GH¢13.9000 to a dollar, up from GH¢11.97 in January.
At some forex bureaux in Accra, the dollar is being bought at GH¢15.00 and sold at GH¢15.30. The BoG’s January 2024 Summary of Economic and Financial Data indicated that the cedi began the year in a better position compared to the same period in 2023 and 2022.
Dr. Ernest Addison, Governor of the Bank of Ghana, reassured that the central bank is closely monitoring the forex market developments.
Growing Concerns from the Business Community
GUTA President, Joseph Obeng, stated that the depreciation of the cedi has severely affected the purchasing power of consumers, reducing business turnover. Similarly, Eddie Kusi Ankomah, National Chairman of CADEG, described the dire situation facing the automobile industry. He noted that vehicle prices have soared due to the escalating dollar rate, with import duties on some vehicles increasing by nearly 19%.
Ankomah highlighted that businesses are struggling to keep up with the frequent cedi depreciation. For instance, the import duty on a Toyota Prado has surged from GH¢45,000 in 2020 to GH¢229,000 this year. Vehicle sales have plummeted, with monthly sales dropping from an average of 20-35 cars to just three.
Calls for Government Intervention
Both GUTA and CADEG emphasized the need for the government to take immediate steps to stabilize the cedi. They criticized the lack of serious engagement from the Ministry of Finance and the BoG in addressing the currency crisis. Ankomah warned that if the trend continues, local businesses will collapse, and foreign businesses, which benefit from lower interest rates, will dominate the market.
Expert Recommendations and IEA Proposals
Economists and market analysts suggest that businesses can mitigate exchange rate fluctuations by using the Forwards Forex market and increasing reliance on local raw materials. Banking Consultant Dr. Richmond Atuahene recommended revisiting laws governing fintech companies to ensure that remittances contribute more significantly to the country’s balance sheet.
The Institute of Economic Affairs (IEA) proposed 17 measures to stabilize the cedi, including enhanced Ghanaian ownership of the economy, industrialization, and strict enforcement of forex market regulations. They urged the BoG to collaborate with security agencies to monitor illegal forex transfers and money laundering, which would help reduce demand for foreign currency.
Conclusion
The depreciation of the Ghana cedi presents a severe challenge to businesses and the economy. Urgent and strategic interventions from the government and the BoG are crucial to stabilize the currency and support the business community.
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