Cedi depreciation: Govt's short term intervention necessary - Economist

Dr. John Kwakye, an economics consultant, believes the government’s short term measures to arrest the falling cedi are in order.

“Currently we have a storm taking place so we need to try and calm the storm. That’s why I can understand the short-term interventions that they are talking about,” Dr. Kwakye retorted on Citi TV’s The Point of View on Monday.

“In other words, try and find some foreign exchange and try and inject into the system. We do that when we experience shocks from time to time.”

He noted that this was an instance where the problem with the cedi was beyond a discussion of economic fundamentals.

“The central bank intervenes from time to time to counter movements in the exchange rate that are due to temporary shocks and not due to the fundamentals because you can’t resist the effect of fundamentals but when you experience shocks, you can come and try to calm the storm,” he said.

Dr. Kwakye stressed that the cedi is an inherently weak currency “and it will continue to depreciate” because “the fundamentals will always kick in.”

“So the macroeconomic fundamentals have improved. But there are structural fundamentals which have not changed,” Dr. Kwakye stated.

The state’s short term intervention

The government expects the fresh injection of capital such as the $750 million Standard Bank bridge facility to deal with the challenges the cedi is currently facing.

The government is also eyeing funds from COCOBOD and the launch of the $3 billion Eurobond.

The cedi has depreciated against the dollar from GHc 4.9 to over GHc 5.5 since the turn of the year.

Finance Minister, Ken Ofori-Atta in comments on the government’s short term move said: “we are going after; $300 million, $600 million and another $750 million and 3 billion and [I think] we should be okay. And all of this should happen within the next two or so weeks.”

But the Minority in Parliament has described these measures as unsustainable.

By: Delali Adogla-Bessa | citinewsroom.com | Ghana
Follow @delalibessa

Source: citifmonline.com