To sustain Ghana’s local currency and safeguard the general performance of the economy in 2015, economists have advised government to focus on a long term achievement of a sustainable exchange rate.
The focus,they maintain should be among others, the promotion of the country’s Non-Traditional Exports (NTEs).
A deliberate policy to increase the exports of the NTEs will fetch the country a sustained inflow of foreign exchange which should put to rest the woes of the Ghana cedi and also place the economy on a sound footing.
A major factor blamed for the depreciation of Ghana’s local currency last year was the loss of foreign exchange. The rapid fall of commodity prices on the world market especially gold and cocoa impacted negatively on the country’s foreign exchange earnings giving the advantage to the dollar and other major trading currencies.
The cedi saw no stability for most part of 2014, depreciating in value by almost 40 per cent from January, with government itself admitting that the depreciating cedi had badly affected economic activities.
The Bank of Ghana (BoG) in a bid to arrest the steep fall of the cedi introduced measures which were heavily criticized as too restrictive and counter-productive.
The measures were however reversed after it became clear that more harm than good was being caused the cedi itself and the Ghanaian economy at large. Needless to say, the measures dealt a heavy blow to businesses, especially banks and hotels.
Barely two weeks into January this year, the cedi has already depreciated by close to 3 per cent, sending signals of the probability for a recurrence of last year’s protracted depreciation of the currency.
Economist and lecturer with the University of Ghana Business School (UGBS), Dr Osei Assibey is worried over the fact that governments over the years only provide short-term solutions to stabilization of the cedi which is achieved through monetary policy restructuring.
“It is quite evident that short-term monetary policy restructuring has not been the best response to the cedi’s predicament because it always comes back to haunt us,” he said.
Some experts have suggested that possible policy mix could be the solution to the long standing economic menace of currency depreciation.
For the trade balance to improve in favour of Ghana, the country’s exports ought to be boosted while imports decline however Dr Assibey admits that decreasing imports cannot be achieved overnight.
“It is not easy to control imports or immediately change the tastes and preferences of consumers but where we have control and competitive advantage is our exports,”
Ghana should ensure that her exports are competitive enough to stimulate the inflow of foreign exchange which will in turn keep the cedi afloat, he said.
“We have to ensure that we have more of our products out there on the international market and we are integrated into the global value chain and flow of foreign exchange is consistent,” another expert noted.
But it is important to note that a conscious effort to stimulate exports cannot be done in a vacuum. The concern thus is that the Ghanaian business environment is unfriendly and a disincentive to competition.
The Ghanaian export sector faces challenges in capacities and quality – production, technical and financial capacities are low across board in every sector.
These weaknesses have for instance prevented Ghanaian exporters from taking full advantage of the Africa Growth and Opportunity Act (AGOA) which has since 2000 been allowing over 6,000 different products from Africa into the USA market quota free and duty free.
“In spite of the incentives provided by programmes like AGOA, the growth of Ghanaian exporters over the past decade has been disappointing,” says Ms Marjorie Abdin, First Vice President of the Federation of Associations of Ghanaian Exporters (FAGE)
FAGE is composed of 18 product associations in export, mainly in the horticulture, fisheries, yam and kola, salt, nuts & seeds and garments & textiles sectors.
The Federation was instrumental in the design and implementation of the President’s Special Initiative on garments however; the results the Federation maintains fell short of expectations in the sense that “the impact on the garment and textile sector in Ghana was hardly felt.”
“Only around 14 companies were established and perhaps the level of investment in another sector may have yielded a greater return on investment, “she notes.
Non-traditional exports for the first eight months of last year went down marginally by about US$44.9 million to US$2.1 billion – reversing the 2013 performance when NTEs went up by 22.2%.
The Federation has long made recommendations for the establishment of a fashion village to promote African fashion.
“A large number of garments and textile companies in one location will provide benefits from economies of scale in production, packaging and marketing. Exporters can place orders at this centre and the orders can be subcontracted to other companies in the area, The Federation says.
Tourists could also visit the site to make purchases for friends and relations back home thus promoting Ghanaian fashion on the international scene, Ms Abdin adds.
Financial Analyst, Mr Sydney Casely Hayford suggests that special attention be given to the development of agro-processed foods.
He stresses on real value addition in the area of agro-processing of foods, adding that the entire value chain held a lot of promise of Ghanaian youth.
Beyond that, Mr Hayford recommends the establishment of centres of excellence in health and education in Ghana from where the country’s neighbours in the sub-region will be able access knowledge.
“We have a strong competitive advantage in herbal medicine so Ghana can become the centre of West Africa for herbal medicine as well as a point of reference so far as education is concerned,” he explained.
The objectives of the suggested focus on more and competitive exports are to boost the generation of much needed foreign exchange to forestall the cyclical depreciation of the cedi and also generate employment for the teeming youth who are unemployed or not gainfully employed.
Having stepped into a new year, the last thing businesses will want to grapple with aside other operational challenges is an unpredictable currency since it has had the effect of throwing their plans out of gear, with the attendant heavy losses.
It is hoped that the stakeholders, including the Ministry of Trade and Industry, the Ghana Exports Promotion Authority (GEPA), FAGE will collaborate to provide the fertile ground for Ghana’s exports to flourish and for the economy’s fortunes to change for the better.
Source: The Finder
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