Minority Leader of Ghana’s Parliament, Dr. Cassiel Ato Forson has alleged that a major
contributor to the cedi depreciation is huge government expenditure which he claimed were not captured in the budget.
He alleged that Government recently paid GH¢ 7 billion to contractors an amount he argued was not provided for in the 2024 budget. He accused the Government of borrowing through Treasury bills and embarking on a spending spree because of the upcoming national elections.
“They are spending as if there is no tomorrow”, he said.
The cedi has depreciated in excess of 14% on the retail market with a number of forex bureax selling the dollar for GH¢15, less than a month after the local currency crossed the GH¢14 mark. Many reasons have been assigned to the declining value of the cedi.
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The Blomberg, cited dwindling supply of the US currency and attributed the shortfall to “a slump in cocoa earnings, with exports dropping by nearly a third to $508 million in the first two months of the year due to adverse weather, disease and fertilizer shortages”.
On the other hand, currency analysts, link the heightened demand for the dollar to corporate requirements such as repatriating profits, paying dividends to foreign shareholders, and servicing external loans.
But speaking to Accra based Citi FM, the Minority Leader and former Deputy Minister of
Finance mentioned government excessive spending as another reason for the cedi depreciation.
He mentioned Government’s quick decision to pay nursing trainee allowances a day after Vice President Dr. Mahamudu Bawumia was confronted by a student nurse about delayed payment, as evidence of unplanned spending for election purposes.
Excessive spending in an election has been the bane of almost every government in the 4th
Republic except in 2004, when Ghana was under the Highly Indebted Poor Country (HIPC)
programme.
Three years of financial stability are usually eroded by the fourth year due to
excessive spending for electioneering activities. Dr. Forson is suggesting that history will repeat itself despite the fact that Ghana under an International Monetary Fund (IMF) bailout programme. He was emphatic that the excessive spending by government will cause the IMF programme to derail by the end of the year.
Meanwhile the depreciation of the cedi appears to be slowing down on the interbank market. Trading opened Thursday morning with the dollar trading between GH¢ 14.30 and GH¢ 14.50, rates close to opening bids and offers for Wednesday.
Currency and Fixed Income Trader, Kojo Dziwornu Letsa, said to The Accra Times eventhough there seems to be an ease in the demand for the greenback, he’s skeptical of its sustainability. The market anticipates that the Bank of Ghana will sell some dollar today, May 16, 2024. Mr. Letsa also explained that the cedi will be stable if the Central Bank injects dollars into the market.
But added that “if that does not happen we should see the cedi extend its losses in today’s trading”,
The Central Bank has been intervening on the market throughout this week as part of efforts to stop the rapid depreciation of the cedi. On Monday, the Bank of Ghana injected about GH¢65 million on the forex market.
This was reduced to about GH¢15.4 million cedis on Tuesday and GH¢14.75 million cedis on Wednesday. It is anticipated the Central Bank will inject additional dollars onto the market today. However it is not clear how significantly these injections can stop the cedi from depreciating.
With uncertainties surrounding the elections, market watcher say it is possible that many people will keep their funds in dollars to protect their income from losing value. This could put more pressure on the dollar and force its value to go up.
