An economist at the University of Ghana, Professor Ebo Turkson, has expressed the need for government to equip and support domestic producers in the country with what they need to be competitive.
According to him, the amount of money that government expects from the IMF and also the cocoa syndicated loan will not solve the perennial problem of the cedi depreciation. He indicated that the country is “import-dependent and we need to shed off that dependency” as soon as possible.
To achieve this, he noted that initiatives such as 1D1F and others in terms of expanding the country’s agriculture outputs are the key things that government needs to be looking at.
“We need to equip our domestic producers with the support that they need to be competitive at producing import substitutes. Because when we reduce our reliance on imports, the greater chunk of the demand for the forex that causes our cedi to depreciate will be taken off. If we begin to add value, it also means that we can export more and not rely on only the traditional exports that we have. So, that in itself, if we do it well, will ensure that our cedi will remain relatively stable.”Prof Ebo Turkson
Prof Turkson highlighted that in the short-term, the amount of resources government is expecting will be able to support efforts to stabilize the currency. He stated that experts are looking for a “currency that will draw back, not necessarily to where it started off from at the beginning of the year” but there will be some substantial appreciation of the cedi given all the efforts that the central bank is putting in place and other efforts that are being done.
Boosting investor confidence in the country
Prof Turkson emphasized that the main reason apart from the country’s import dependence, which has occasioned the depreciation of the cedi is the fiscal challenges in the economy. He stated that until government is able to reduce its fiscal deficits to a very low level and if it keeps on running huge fiscal deficits, the debts will become unsustainable.
“… We’ll not have access to good money on the capital markets and then when that happens, investors that are in our economy will want to send their money out. That in itself, is one of the main reasons why our cedi has depreciated. So, the main reason for the current situation that we have has been the past two years where we’ve run fiscal deficits cumulatively for the past two years of well over 20%…”Prof Ebo Turkson
Describing the fiscal challenges in the country as a cycle, Prof Turkson expressed the need for government to “rationalize our expenditure” by scrutinizing expenditure items which affects the fiscal health of the country. He revealed that once that is achieved, it proves to prospective investors that the country is making credible initiatives to consolidate its fiscal position.
“When we begin to do this and investors have confidence, we are going to have an upgrade from the rating agencies and that is a signal to them that they need to stay. But if we do not do anything about it, then our investors will not have any confidence that this is the country that is serious about doing something with its fiscal position.”Prof Ebo Turkson
Prof Turkson emphasized that the rate at which government can raise revenue, cannot keep pace with the sort of expenditure that is going on now. With this, he urged government to immediately tackle the problems of fiscal challenges in the country.