Dr. Sam Ankrah, President of Africa Investment Group, has chided the Central Bank for constantly interfering with the determination of the value of the cedi, while calling on the Apex Bank to allow market forces to work and determine the cedi’s value.

According to the investment banker, the non-interference from the Bank of Ghana (BoG) should form part of the medium to long term recovery process.

“The Bank of Ghana should allow market forces of demand and supply to determine the real value of the cedi. The central bank’s habit of tapping into its reserves to stabilise the cedi is not only artificial but unsustainable.”
Dr. Sam Ankrah

Dr Sam Ankrah, in the intervening time, wants the government to aggressively pursue an export strategy, focusing more on exportable goods and services with potential to add real value to the currency and the economy.

As a near term measure, Dr Ankrah suggested that the cedi should be pegged at 10:1 to the United States dollar to allow for some breathing space, for example, a minimum of 5 years.

“When this is done, and aggressive local policies are implemented, using fiscal policies to change the behaviourial and consumption pattern of the people, it will lay the foundation for the currency to stabilise. So, by the time you have finished 5 years, your demand for USD is significantly diminished.”
Dr. Sam Ankrah

Other Available Options

Among the options available to add real value to the cedi, which is rated as the worse performing currency on the continent and to restore economic stability, Dr Sam Ankrah said, “We could disincentivise all imports of staples (rice, maize, tomatoes, etc) and restrict imports on electrical and electronic stuff (fridges, freezers, air-conditioners and vehicles) while we give incentives to domestic production and purchase of locally made alternatives.”

“If you need convincing, just look at the appreciation of cedi in 2019/20 when COVID stopped us from travelling,” the investment banker added.

Dr. Sam Ankrah’s comments came on the back of the two major rating agencies- S&P and Fitch lowering Ghana’s local and foreign currency credit ratings to CCC /C from B-/B, pointing to the government’s limited commercial financing options, and constrained external and fiscal buffers.

Dr. Ankrah opined that the economy is in tatters and in desperate need of fresh ideas, including having to cut down on imports, to restore investor confidence and stability.

“The government’s failure to borrow from the international market, and investors’ reluctance to hold assets in cedi, speaks to the magnitude of work to be done and the need for a change in approach.”
Dr. Sam Ankrah

It can be recalled that a Financial Analyst and Portfolio Manager at SIC Financial Services Limited, Mr. Isaac Kwasi Mensah, made similar recommendations in an exclusive interview with the Vaultz News. He recommended the Bank of Ghana (BoG) to use the crawling peg option to fix the rate at a near market rate to tackle the challenges with the depreciation of the cedi.