Economist and Business Consultant, Dr. Ebenezer Ashley has indicated that the Ghana cedi has recorded its all-time best performance for the first half of 2020 than the first six months of any year since 2012 against the U.S dollar. Dr. Ashley made these observations in an interview with our reporter on the current developments in the exchange rate market amid the Covid-19 pandemic.
Supporting his claims with the data, Dr. Ashley indicated that “you see as the data shows, the cedi performance shows a first six months’ depreciation of 26.71% for 2014; 26.2% for 2015; 3.26% for 2016; 3.73% for 2017; 2.37% for 2018; 8.35% for 2019; and 2.36% for 2020. The depreciation so far this year is the lowest since 2014 and this is particularly remarkable in the context of the COVID-19 pandemic.
In fact, many emerging market economies have seen sharp depreciations of their currencies against the US dollar following the global slowdown that has resulted from the COVID-19 pandemic.
Dr. Ashley indicated that as at June 2020 the South African currency had depreciated against the US dollar by 21.4%, Mauritius by 9.3%, Brazil by 31.6%, Turkey by 15.4%, Argentina by 17.9%, Russia by 16.0%, Zambia by 28.2%, Mexico 17.4%. So when you consider that the Ghana cedi has only depreciated by 2.4% thus far notwithstanding the pandemic one will have to congratulate the managers of the economy, especially the Bank of Ghana, for a good job done.
Asked whether or not the strong performance in the cedi in 2018 could be attributed to mainly drop in imports as result of Covid-19, Dr. Ashley opined that cannot be the primary cause because it all the other countries registering these large depreciations are also seeing declines in imports but are still depreciating in double digits. He believes that prudent management of Ghana’s economy and strong and steady economic fundamentals such as inflation, interest rates, gross international reserves, are accountable for the relative stability of the cedi. “What is happening in Ghana is a testament to the strong fundamentals of the economy before COVID-19 hit. When your fundamentals are strong you are able to absorb shocks better” he noted.
Dr. Ashely further pointed out that between 2017 and 2020, the cedi has depreciated at an average of 8.7% compared to 18% between 2013 and 2016. This means that if the cedi has continued depreciating by an average of 18% annually since 2017 as was the case under the previous government, then today the exchange rate of the cedi to the dollar would have been GHC 7.6 to the dollar or higher given the pandemic.
Dr. Ashley however warned that the full effects of the COVID-19 pandemic are yet to be felt. The deficit this year is going to increase because of increased borrowing as revenues have fallen. Expenditures on the other hand have increased to deal with the pandemic. “This is however not peculiar to Ghana and even the richest countries are engaging in deficit financing to cope with the pandemic”.
“This year is about saving lives and livelihoods and not about lower deficits and debts. “he added.