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The minority in Parliament attributed the rapid depreciation of the cedi to the mismanagement of the economy and the erroneous policy choices of the government.
The sharp depreciation of the cedi has deteriorated the country's economy, leading to bankruptcy of companies, loss of jobs and loss of investor confidence.
During a media meeting on the situation of the Ghanaian economy in Accra on Wednesday, the spokesperson for Minorities on Finance and ranking member of the Parliament's Finance Committee, Mr. Cbadiel Ato Forson, said "that things are deteriorating and that the gross domestic product (GDP) expected) a growth rate of 8.8% can not be achieved".
He added that the growing depreciation of the cedi, with its adverse effects on macro and microeconomic performance, had affected the credibility of the government's budget statement and economic policy for the 2019 financial year.
Mr Forson therefore asked President Nana Addo Dankwa Akufo-Addo to present a new budget or statement to review the micro and macro objectives and to identify measures to address the gaps.
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He again warned the government against desperate measures to stop the cedi down, as these measures would worsen the situation.
It has been reported on various media platforms, both locally and internationally, that the cedi / US dollar exchange rate is expected to reach about 6 ¢ ¢ per dollar by the end of the third quarter of 2019.
The cedi / dollar exchange rate last Tuesday rose to 5.65 GH ¢ per dollar and 5.60 GH ¢ per dollar respectively at Fidelity Bank Ghana Limited and Ghana Commercial Bank.
Journalists, professional badociation leaders and union leaders attended the media meeting, which focused on different sectors of the economy.
Causes of the depreciation of the cedi
Mr. Forson stated that the cedi depreciation could be attributed mainly to portfolio outflows (foreign investors repatriating coupons and constituents) and to a large current account deficit mainly due to significant service charges and payments of 39; interests.
"The current account at the end of December 2018 showed a deficit of 3.2% of GDP.Thus, in the context of a low current account and increasing portfolio outflows, the Bank's major interventions in the foreign exchange market in Ghana had the effect of reducing its gross GDP significantly, could not stop the depreciation of the cedi, which reached 9% at the end of the year, and therefore the foreign exchange market pressures persisted in 2019 Other causes of exchange rate depreciation include, "he said.
Mr Forson blamed the government for announcing a projected overall deficit of 4.2% of GDP (excluding financial sector costs) for the 2019 financial year.
He said the announcement of the policy was sending negative signals to the investment community because it was inconsistent with the government's policy decisions.
"The finance minister and his team should have known that our investors are aware that the projected deficit level can not be reached because of their poor fiscal performance because of unrealistic badumptions about income, the sub-prime performance of spending and accumulation of arrears, "he said. .
Mr Forson said the proposed financing options for 2019 also indicated that the deficit level would exceed 4.2% of GDP (excluding financial sector costs).
In addition, he said, the government is about to give the Ghana National Petroleum Corporation (GNPC) the guarantee to borrow about $ 250 million for the government using royalties on oil revenues as guarantee, contrary to the provisions of the Petroleum Revenue Management Act 815).
Mr. Forson said the government also overindebted mining royalties as collateral for a $ 200 million loan, which goes against the Public Financial Management Act (Act No. 921). ) and the Ghana Education Trust Fund (GETFund), which has also been guaranteed to borrow $ 1.5 million. billion.
"Once again, the government is borrowing $ 2 billion from Synohydro in operating our undeveloped bauxite lease, and the government recently gave Ghana Amalgamated Trust Limited (GAT) a guarantee to borrow money. 2 billion GH to consolidate the capital of some indigenous banks that could not meet the minimum capital requirement of 400 million GH set by the Bank of Ghana, "he said.
Forson said the government has not been transparent with investors on recent policy announcements and funding decisions, and said investors have mixed feelings. increased uncertainty and that they could leave the economy as funding options should put further pressure on exchange rates. .
He added that unrealistic fiscal projections and incomplete disclosure of financing options were sufficient grounds for investors to repatriate more of their capital.
Forson said the Bank of Ghana, which is expected to implement independent monetary policies in order to fulfill its core mandate of maintaining price stability, has laid the foundation for caution and has begun implement flexible and populist monetary policies.
For example, he said, the Bank has adopted an Inflation Targeting (IT) framework for conducting its monetary policy and has indicated that although its own research papers / studies show that Risks from external and domestic sources have intensified and suggested stopping the easing of monetary policy, the Bank decided otherwise.
Impact of the depreciation of the cedi
Forson said he feared that the outspoken Vice President, Mahamudu Bawumia, had exiled himself for economic reasons, perhaps as a result of the strong public reaction he suffered from him the subject of all the jokes of the traditional and social media. .
He said that Mr. Bawumia's misleading statements about the economy while in opposition and the propaganda conferences organized to give the impression of exceptional knowledge of economic management on his part, combined it to expose it to the ridiculous public after the disaster down the value of the Cedi.
"His famous quotation" When the fundamentals are low, the exchange rate will expose you ", has become the benchmark against which the performance of the Akufo-Addo government is badessed and deemed insufficient.The rapid depreciation of the Cedi is an indication that the fundamentals of the Ghanaian economy are not only weak, they have been completely exhausted, and the real sector is likely to suffer the consequences of the Cedi's depreciation, "he said.
Forson said the Cedi depreciation is expected to increase business costs, and said domestic companies that depend on imported raw materials will be forced to pay more in cedi for their raw materials.
This, he said, will increase production costs, make domestic firms less competitive and eventually drive them out of business.
Mr. Forson said the Cedi depreciation should also be added to the public debt recorded in cedis because of the higher debt servicing cost of the dollar debt.
"The public debt will increase if we consider all of the new loans and sovereign guarantees issued by the current government of nuclear power plants.They have a plan emitting $ 3.0 billion US dollars. At the time of realization, they would have added 6 billion GH ¢ to the debt If one takes into account the GAT guarantee of 2.0 billion GH ¢ and many other issued, the NPP government will make history add more than 50 billion GH to the public debt every year, "he said.
Mr. Forson stated that the rapid depreciation of the exchange rate did not come with an inflation rate of 9.2%, since an economy can not be externally stable and stable. internally.
He added that the depreciation of the Cedi should create inflationary pressures as it has repercussions on fuel prices, energy costs, transportation costs, utility prices, cost of goods and services. import and prices of imported food products.
Mr Forson said that the issuance of European bonds of 2019 approved by the Parliament of the amount of 3 billion US dollars, net of a billion dollars, would only 39, improve liquidity in the short term but would not solve external vulnerabilities. "We want to use this opportunity to warn the government not to give false hope to citizens because it will not solve the problem of depreciation of the currency."
Five questions to Dr. Bawumia
Mr. Forson asked Mr. Bawumia, who is the head of the government economy management team, to provide answers to the following five questions.
Why would an independent central bank focused on price stability decide to lower the money rate in relation to its own research results?
Why would the BoG have decided to lower the key rate in view of the decrease in net international reserves and the rise in interest rates abroad?
Why would the central bank decide to lower the key rate in favor of growth, which should be higher than the previous year, while the local currency is under pressure?
Why would the BoG have decided to lower the key rate in the face of excess liquidity in the banking sector from banks increasing their minimum capital by more than 100%, while the local currency depreciated rapidly?
How could a rapid exchange rate depreciation be accompanied by a single-digit inflation rate, as indicated by published macroeconomic indicators?
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