Dr. Mahamudu Bawumia has revealed that the Bank of Ghana, under the National Democratic Congress government, has spent a whopping $6.5 billion from 2009 to date, in their failed attempt to stabilize the value of the Ghana cedi.
Notwithstanding this large expenditure of scarce foreign exchange reserves, Ghana's currency is now officially, the worst performing currency in the world.
According to Dr. Bawumia, in 8 years of the administration of President John Agyekum Kufuor, the Bank of Ghana spent some $2.5 billion in non-oil foreign exchange sales to stabilize the cedi. At the time the NPP left office in January 7, 2009, the cedi traded at GH¢1.2 to $1.
However, despite the $6.5 billion spent by the Bank of Ghana to intervene on the foreign exchange market, the Ghana cedi, according to Dr. Bawumia is currently trading at almost GH¢4 to $1.
Dr. Bawumia noted that this indicates that the fundamentals underlying the Ghanaian economy are seriously out of gear. He also pointed out the fact that by the end of 2014 the cedi would have depreciated by more in one year than in the entire period of the NPP administration between 2001-2008.
The running mate to Nana Akufo-Addo in the 2008 and 2012 elections also revealed that Ghana's net international foreign exchange reserves, which currently stands at some $700 million, can now only account for less than one week of import cover, a very precarious situation.
"The bills that we owe as a nation is currently more than what we have in our reserves, and yet still the government says we are not in a crisis?" Dr Bawumia asked.
In view of this serious situation, Dr. Bawumia stressed that Ghana will soon have no option than to opt for a bailout from the International Monetary Fund, as opposed to claims being made by government that it is not considering a loan from the IMF.
Dr. Bawumia indicated that the admission made by Finance Minister, Mr. Seth Terkper, on July 17 that "paying statutory funds will cripple the economy" means the economy is already crippled and on the verge of bankruptcy.
"When schemes like GYEEDA, SUBAH, SADA crop up, the NDC will always find money for it. However, when statutory payments to the NHIS, District Assemblies Common Fund, GETFund are to be made, the government will say there is no money," Dr. Bawumia noted.
He continued, "When they say there is no money, they will tell you some dwarves came in and stole money. If it is not high rise buildings, it is speculators. If it is not speculators, they will tell you it is the redenomination of the cedi in 2007 that is the cause of the current crisis. They really do not have a clue”
Ghanaians and the international community, Dr. Bawumia noted, have lost confidence in the Ghanaian economy, and contrary to recent expressions of confidence in the economy by Government officials, Dr. Bawumia argued that "You cannot manufacture confidence. Confidence has to be based on prudent, sound and credible policies. You cannot just wake up and try to convince people to have confidence in an economy. Unfortunately there is no basis for this contrived confidence. If you are going to solve a problem, the first thing to do is to admit the problem. The NDC have refused to acknowledge that the economy is in crisis, how can the problem be solved if expectations are not properly aligned?"
On the decision to go for a 3rd Eurobond issue, which is expected to raise $1.5 billion to be used to fund government’s capital expenditure in the 2014 Budget as well us shore up depleted foreign exchange reserves, Dr. Bawumia's prognosis was simple.
"You cannot borrow yourself out of bankruptcy," he said. With Ghana’s debt levels at almost 60% of GDP and interest payments in 2014 amounting to more than four times Ghana’s oil revenue for the year, it is not clear how adding to the debt burden is going to get us out of the current crisis. While the Eurobond borrowing would provide additional borrowed foreign exchange to support the cedi, the impact is bound to be temporary if the fundamentals are not addressed. Note that the Bank of Ghana has already spent some $6.5 billion of foreign exchange reserves in the last six years to no avail. So what difference will an additional $1.5 make if the underlying policies are wrong?” he asked.
Dr. Bawumia made these comments when he addressed delegates from the Upper West Region during the tour of the region, Friday evening, by Nana Addo Dankwa Akufo-Addo.
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