Ken Ofori-Atta blames fall of cedi on structural rigidities and speculation 

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 The Minister of Finance, Ken Ofori-Atta, has stated that the cedi is performing better under the Nana Addo administration.

He explained that the cedi recently suffered some turbulence despite the strong economic fundamentals and improvement in the country’s balance of payments, which the government achieved in the last two years.

“It is also noteworthy that while this is a challenge, the cedi has, however, performed better over the past two years than when compared specifically to 2012 to 2016,” he stressed.

During President Mahama’s first 26 months, from January 2013 to February 2015, the cumulative depreciation of the cedi against the US dollar stood at 45.8%.

However, in the first 26 months of the Akufo-Addo government, from January 2017 to February 2019, the cumulative depreciation of the cedi was 14.6%.

In 2013, under President Mahama, the cedi depreciated by 15.6% and it depreciated further by 32% in 2014.

In 2015 and 2016, it depreciated by 11.9% and 9.7%, respectively.

However, under President Akufo-Addo, the cedi depreciated by 4.4% in 2017 and 8.8% in 2018. So far in 2019, it has depreciated by 3.6%.

Mr Ofori-Atta made the statement when he addressed parliament on some key events that had occurred recently on the economy for the first quarter of 2019.

What caused cedi’s falls?

According to him, the depreciation of the local currency was not due to weak economic fundamentals, but rather a combination of structural rigidities and apparent speculative behaviour of portfolio investors and market participants.

The Minister of Finance asserted that the cedi has made great strides towards recovery on the back of the successful issue of the $3 billion Eurobond and the completion of the IMF review, which restored confidence in the economy.

He said, currently, the cedi witnessed substantial gains and with the measures put in place, adding that with the existing sound economic fundamentals, they anticipated the stability of the cedi going forward.

“Indeed, the cedi has appreciated by 5.12% in March 2019 alone as against a depreciation of 2.7% in the same period last year,” he added.

Some of the events included the formal completion of the Extended Credit Facility programme with the International Monetary Fund (IMF), the $3 billion Eurobond issuance, the recent development on the foreign exchange market and the cedi, as well as the visit of the World Bank Vice-President for Africa, Dr Hafez Ghanem.

“We have done a lot of work to ensure that the economic fundamentals are robust and able to support economic growth and transformation,” he said.


He cited statistics which evidenced that inflation declined from 15.4% in 2016 to 9.4% in 2018; fiscal deficit falling from 6.5% to 3.9% in 2018; interest rate on 91-day Treasury bill from 16.3% in 2016 to 14.6% in 2018; and Current Account deficit from 6.6% in 2016 to 3.2% in 2018.

Mr Ofori-Atta also stated that current progress on the economy, sustained Gross Domestic Products (GDP) growth and economic transformation would eventually ensure that the currency was stable over the medium term.

He assured that the Bank of Ghana (BoG) would remain vigilant in the short term to build adequate reserve buffers and promote market discipline in the foreign exchange market over the medium term.

“The government will ensure that we have a transformed economy that will strengthen our trade, current and capital accounts.”

Committee to probe cedi’s depreciation

He announced that President Akufo-Addo has directed him to probe the structural difficulties that cause the recurring depreciation of the currency Ghana cedi and to address the problem.

In view of this, the Finance Minister announced the setting up of a bi-partisan committee to look into the situation.

“The President has directed that I investigate the structural causes for the depreciation of the cedi and propose measures to address the situation. The government and I will put a bi-partisan committee together to proceed immediately.

“Our current progress on the economy, sustained GDP growth and economic transformation will eventually ensure that the currency is stable over the medium term.”

Mr Ofori-Atta reiterated that the high participation of foreign investors in Ghana’s recent issue of $3 billion Eurobond confirms investor confidence in Ghana.

Comparing Eurobond coupons

Comparing the $3 billion Eurobond bond to the last bond of $750 million raised under the Mahama administration, Mr Ofori-Atta argued that government got a better coupon rate, a positive sign at a time Ghana was exiting an IMF programme.

“The last Eurobond of the previous government of $750 million was issued in 2016; the order book was $4 billion, over five times larger.

“But this came at a high cost of 9.25% for six years,” Mr Ofori-Atta stated.

He pointed out that compared to this year’s bond of 7.785% for a seven-year bond, the government has done well in pricing its bonds.

Fiifi Kwetey reacts

Mr Fiifi Kwetey, Member of Parliament (MP) for Ketu South, in his contribution, refuted claims by the Finance Minister that the NDC government signed up for a three-year IMF Extended Credit Facility in 2015 to fill a $930m gaping hole in the economy.

He argued that the figure put out by the Finance Minister was too measly and paltry to have compelled the NDC government to invite an IMF bailout.

He stated that the NDC administration, under President Mahama, had spent much more on infrastructure to consider a lack of $930m great enough for an IMF bailout.

Mr Fiifi Kwetey, who was also former Deputy Minister of Finance, described the New Patriotic Party (NPP) government’s celebration of Ghana’s exit from the IMF a “whole pretence”.

He said the attempt by the NPP government to claim a crown of “economic messiahship” as Ghana leaves the IMF programme in 2019 was deceptive.

He said history did not give the NPP that title because shortly after leaving the IMF in 2006, the NPP government, under President John Kufuor, suspended fiscal restraint and embarked on reckless spending.

He said despite a budget deficit target of about 4% in 2008, the NPP government hit a 15% deficit, an 11% miss, which he described as the highest in history.

“Your history shows you have gone out of IMF before, but the mess you left in two short years after completion was absolutely terrible,” he added.

The value of the cedi until earlier this week had greatly reduced, sparking concerns of economic challenges.

At a point, it was trading at GH₵5.80 to a dollar, but it began gaining strength last week after a government intervention, which was actually expected to yield evident results within two weeks.

Source: The Finder

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Kennedy Mornah is an Award Winning Ghanaian Journalist with over two decades of experience in the Ghanaian Media landscape spanning the electronic, print and digital media. He is a Media Consultant, a Corporate MC, Radio and TV Host, Founder and Publisher of the Maritime and Transport Digest Newspaper, Businessman, a Go getter and an optimist. He has worked for renowned media organizations including Diamond Fm in Tamale, Luv Fm in Kumasi, Oman Fm in Accra and Starr Fm in Accra In 2017 he received the Reporter of the Year Award at the Ghana Shippers Awards in Accra, Ghana.

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