Vice President and Flagbearer of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia, has highlighted that the current strength of the Ghanaian Cedi against the US Dollar represents an improvement compared to its performance during the previous NDC government.
Dr. Bawumia emphasized that the Cedi has maintained a relatively stable position under President Akufo-Addo’s administration, reaffirming his position on the stabilization of the currency.
He noted that despite facing ongoing global economic challenges, the depreciation of the Cedi has been manageable under the current government, in contrast to its performance during the NDC administration.
“Why not? We use averages to measure progress in statistics and economics all the time. It is a valid comparison of the management of the exchange rate under our government versus under the NDC government.
“The point is that notwithstanding the major global and domestic challenges we have been through, it is remarkable that whereas the exchange-rate depreciation between 2009-2016 averaged 13.9%, between 2017-2023 it averaged 13.1%. That is a fact.”
Dr. Mahamudu Bawumia
According to Dr. Mahamudu Bawumia, statistics revealed that between 2009 and 2016, the Ghanaian Cedi depreciated by a total of 71.1%, while from 2017 to 2023, the cumulative depreciation was 64.6%.
He argued that whether considering the average or total depreciation, the Cedi has depreciated less under his government, despite enduring significant global economic challenges.
Dr. Bawumia also stood by a statement he made during the NPP’s 2016 campaign, supporting his assertion that an exchange rate exposes a government’s weakness in economic fundamentals.
He explained that the current exchange rate in the country is influenced by global crises such as the Russia-Ukraine war and the COVID-19 pandemic of 2019, among other contributing factors.
“Absolutely! It is still true, and I will continue to stand by that statement. We saw that between 2017 and 2021 when the fundamentals in terms of the fiscal deficit, inflation, GDP growth, external balances, and international reserves were fairly strong, the exchange rate was relatively stable.”
Dr. Mahamudu Bawumia
The Vice President highlighted a series of challenges including the banking sector crisis, excess-capacity energy payments, the COVID-19 pandemic, restricted access to international capital markets, and currently the ongoing Russia-Ukraine war.
He said these events collectively weakened the economy’s fundamentals, leading to increased fiscal deficit and debt levels.
He pointed out that by the end of 2022, inflation had surged to around 53%, and the exchange rate depreciated by approximately 30% during the same period.
However, recent improvements in the fiscal deficit, inflation rate, and external reserves have contributed to a more stable exchange rate, validating his previous remarks on the economy.
Economic Indicators and Monetary Policy Outlook
As of February 2024, Ghana’s fiscal deficit was projected to narrow to 4.5% of GDP, with a margin of ±50 basis points.
However, the year-on-year inflation rate for March 2024 was 25.8%, which can give an approximate indication of the inflationary trend.
The Bank of Ghana (BoG) indicated that its foreign exchange reserves have remained steady and are estimated at $6.2 billion as of April 5, 2024, despite the delays in the disbursement of some donor support.
Dr. Ernest Addison said the Central Bank would continue implementing policies that have helped sustain that progress including the innovative Gold for Reserves program, “which has acted as a game changer in our foreign exchange management strategies.”
“During the first quarter of this year, this progress has continued although we have witnessed some slowdown in the pace of disinflation primarily due to a variety of factors including adverse base drift effects.”
Dr. Ernest Addison
He said the expectation however is for the disinflation process to resume in the second quarter of 2024 and beyond driven by continued maintenance of a tight monetary policy stance.
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