The President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng, has lamented the sharp depreciation of the cedi, which he said has led to a significant loss of capital for businesses.
Since the beginning of the year, the cedi has plummeted in value against major currencies, particularly the US dollar. Initially, the cedi was trading at GHC 11.98 to the dollar at the start of the year.
However, it has now weakened to around GHC 14.85 at forex bureaus, marking a depreciation of nearly 20%.
Dr. Obeng emphasized that this decline means traders have effectively lost 20% of their capital, posing serious challenges for businesses reliant on foreign exchange.
He explained that “depreciation is simply a loss of capital so if the currency is depreciating this much, for now, we can confidently say most of us have lost about 20% of our capital.”
“The goods that we import even we go to China … we trade in dollars when we are shipping the goods we also pay in dollars now the freight charges have gone up the roof like the COVID era. Then the goods come and the duty is also benchmarked in US dollars.”
Dr. Joseph Obeng
Former Deputy Minister for Finance, George Kweku Ricketts-Hagan, moreover issued a stark forecast, predicting that the cedi could plunge to GHC 25.00 per dollar by the end of 2024.
This ongoing depreciation continues to hit businesses hard, as traders require significantly more cedis to purchase dollars for their imports.
However, Finance Minister Dr. Mohammed Amin Adam, pointed out that the cedi’s depreciation this year is less severe compared to about 27% depreciation same period in 2023.
Dr. Joseph Obeng responding to how businesses are faring under the circumstances, warned that the decline is having dire consequences for association members, forcing some businesses to shut down.
GRA Refutes Foreign Currency Duty Claims
On Thursday, May 16, the Ghana Revenue Authority (GRA) issued a statement refuting claims suggesting that it computes customs duties using foreign currency. According to the Authority, the allegation is baseless and inaccurate.
Regarding the GRA statement, Dr. Obeng stated that “whatever they were saying just confirmed what we are also saying.”
“We are not saying that we pay the duty in dollars, that is not what we have been saying, but we say that they benchmark the calculations with dollars so if the exchange rate goes up, it also makes the duties that we are paying go up.”
Moreover, he emphasized that businesses cannot pass on these costs to the consumer because consumers also have limits. He added, “When prices go up it affects inflation and inflation eats into the pockets of the consuming public, the purchasing power is gone.”
Dr. Obeng noted that because of the depreciation, businesses are unable to service their debt since consumers are not able to buy the volumes of goods they used to buy.
“If you have a supplier who gives you credit and you are unable to service that credit, your integrity is gone, he might not give you credit again, so this is the situation we find ourselves in.”
Dr. Joseph Obeng
GUTA urged the government to “take urgent steps to address” the continuous depreciation of the cedi against major foreign currencies.
The persistent depreciation of the cedi against major currencies, as highlighted by GUTA, signals a grave threat to businesses in Ghana. Dr. Joseph Obeng’s warnings underscore the dire consequences, including capital loss and potential business closures. Urgent government intervention is crucial to mitigate these challenges and stabilize the economy for businesses and consumers alike.
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