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Danger! Ghanaian Economy Faces Collapse   
 
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28-Jan-2014  
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Ghana is on the verge of experiencing “serious” economic crisis if immediate, urgent and pragmatic measures are not taken by managers of the economy.

This revelation came to light during discussions on Ghana, Great and Strong broadcast by Ghana’s premier Internet-based-radio, www.hedjorleonlineradio.com in Accra, over the week-end.

Ghana Great and Strong, a non-partisan programme which aims at strengthening the country and making its entire people prosperous, is hosted by Dr. Papa Kwesi Nduom every Saturday evening from 7.00-8.00 pm.

Speaking on the seriousness of the problem, Head of Research at Gold Coast Fund Management Limited (GCFML,) Samuel Ampah, noted that for the past five years, the national currency, the cedi, has depreciated over 200 per cent since the re-denomination took effect.

That development, he stressed, is seriously affecting the Ghanaian economy.

He pointed out that barely twenty-seven (27) days into the year 2014; the cedi has depreciated about 7 per cent to the British Pound and 7.5 per cent to the Euro.

“With the high rate of importation and the “dollarization” of key sectors of the [Ghanaian] economy, the rate at which the cedi can resurrect is minimal,” head of research at GCFML indicated.

Against this backdrop, Mr. Ampah urged Bank of Ghana (BoG) to initiate measures to mitigate the decline of the cedi.

Host of the programme, Dr. Nduom, pointed out that careful research will show that the depreciation of the cedi did not begin this year or last year. Indeed, the cedi has consistently depreciated for the past twenty years. So short term solutions will not work today just as redenomination did not provide a solution. If the fundamental problems facing the economy are not resolved, no short term solution or legislation as suggested by the Vice President will solve the problem.

He charged the ruling National Democratic Congress (NDC) government to put down pragmatic steps to halt the situation from going bad.

Government, he recommended, must be bold and use its purchasing power to help Ghanaian entrepreneurs produce what “we need instead of importing everything we eat and use.”

According to Dr. Nduom, the current NDC government holds the key to make things work.

“Dollarization has become part of us and the financial institutions have failed the country in finding a lasting solution to the problem,” Dr. Nduom asserted.

Financial institutions have focused on short term lending and investments that only favoured import oriented enterprises, he added.

He cited various reports both local and international which have warned Ghana about the nature of how the economy is being managed.

He cautioned against unnecessary expenditure borne out of misplaced national priority, corruption in both public and private sectors, indiscipline in the financial sector, lack of monitoring and evaluation among others.

Recently, it was reported by Standard Bank Group Limited (SBGL) that measures planned by the

BoG to control lenders’ foreign-exchange trading might not halt a slide in the cedi as it headed for 19th straight annual depreciation against the US Dollar.

“The root cause remains the sizable fiscal deficit which adds to aggregate demand and external imbalances, and the need for further fiscal consolidation and measures to slow economic growth if one wants to reduce the pace of depreciation of the cedi,” the Group said.

That report further that the cedi plummeted 15 per cent this year against the US Dollar, driving up inflation as Ghana missed a target to reduce the budget deficit to 9 per cent of gross domestic product (GDP).

According to the SBGL, the cedi decline is the worst among 22 African currencies after the South African Rand, the Malawian Kwacha and Sudan’s Pound.

In November last year, the Minister of Finance, Seth Terkper, said Ghana’s fiscal deficit was forecast to be 10.2 per cent of GDP before narrowing to 8.5 per cent in 2014.

Another international reputable agency, Fitch, reporting on Ghana’s economy has stated that “the pace of fiscal consolidation over the next two years will be slower than the government projects. “ The agency lowered Ghana’s creditworthiness one step to B, five levels below investment grade. Standard & Poor has also changed Ghana’s outlook to negative.
 
 
Source: Daily Guide
 
 

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