Director of the Institute for Statistical, social and Economic Research (ISSER), University of Ghana Professor Felix Asante has revealed that the current exchange rate stability of the Ghanaian currency, the cedi is not sustainable in the long term.
According to him, the current stability the cedi is not as a result of export development but is due to inflows from Foreign Direct Investment (FDI) hence the need for immediate measures to be taken by government to reverse the trend and guarantee the constant stability of the local currency.
Professor Asante, who stated this during a Breakfast meeting organized by Graphic Business and Stanbic Bank in Accra strongly advocated the urgent need for Ghana to move from primary commodity exports to massive investment in export development through value addition to the numerous natural resource endowments of the country.
He acknowledged with deep concerns that the continuous exportation of raw materials outside the shores of the country would pose negative consequences to the Ghanaian economy since no efforts are being made for value addiction locally.
The cedi, which experience much decline in 2015 and 2014 by 17% and 30.9% respectively, has performed better this year, depreciating only by 4.3 percent against the US dollar and appreciated well with other major currencies.
Professor Asante cautioned government against excessive expenditure in an election year on Infrastructural Projects in the quest to satisfy the needs of voters, which he noted could have dire consequences on the macro-economic Stability of the nation.
He emphasized the need for government to remain firm and resist pressures to spend beyond budgetary provisions.
According to the Professor, Budget overruns especially in election years have had negative influences on the macro-economic environment.
“It’s very important that The Government remains firm in its commitment, and not to be carried away by the pressure to spend,’’ he emphasized.
He noted the passage of the Public Financial Management (Act), will cushion Public Finance handlers from political pressures to spend beyond unplanned budget.
Meanwhile, the Minister of Finance Seth Terkper, has conceded that more robust measures including value addition for export rather than external dollar debt sale is critical to sustain and further strengthen the current relative stability of the cedi.
He noted the establishment of the Ghana Export-Import (Exim) Bank will help increase exports whiles providing enough forex with low interest rate to stabilize the cedi.
In 2015, Ghana`s total imports amounts to US$10.46 billion whiles exports stood at US$10.35 billion with a trade balance of US$3.1 billion.
Industry players say the decision by government to reach out for the US$918million IMF`s facility, COCOCBOD`s US$1.8 billion cocoa syndicated loan, the US$750 million Eurobond and the Bank of Ghana`s commitment to streamline its monetary policy have all contributed in sustaining the free fall of the cedi which cannot be sustain in the long term.
By CHRISTIAN KPESESE
