Feature Article of Thursday, 14 June 2012
Columnist: Berko, George
and Not Reassuring Enough.
In response to Dr. Bawumia’s recent comment on the fall of the Ghana Cedi that we may have to keep the dollarization of the Economy in check, the Deputy Finance Minister, Mr. Fiifi Kwetey, was reported to have expressed his skepticism with that notion of Dr. Bawumia’s. (Please, see: “ Fifi Kwetey: Halt in dollarization of economy won’t stop free fall of cedi” on Ghanaweb.com for the June 13th, 2012). The Finance Minister then suggested that some structural changes in our Economy are, rather, what we need.
I was shockingly disappointed that the Deputy Minister just left us with that general notion of us needing some structural changes in the Economy. To me, needing ‘structural changes’ is just too broad, too vague. That is not very reassuring. Okay, fine. It is good to know we need structural changes in our Economic System to stabilize the Ghana Cedi. So, what structural changes does the Deputy Minister suggest we make? It is not just enough to say we need those changes. And for how long would we have to wait for those changes? Without specificity, the Public gets even more anxious, since we all know that structural changes usually take a considerable time to accomplish and begin to make any impact.
As an important Official responsible in part for overseeing the growth and success of our Economy, the Deputy Finance Minister ought to have given us more than just the mere mentioning of what the Economy generally needs in the long run. The Market and folks cannot wait forever for any such structural changes. The tumbling of the Ghana Cedi is not necessarily going to wait upon the hint the Minister gave for fixing its malaise. What we need is some immediate action to arrest the free fall of the Ghana Cedi. But ‘Structural Changes’ in the Economy does not seem like an express fi x for our money.
We are more interested in knowing what specifically the Government intends to do to stabilize the Ghana Cedi. When the Ghana Cedi takes flight ever so often, in downward direction, investors hesitate a lot to invest more in our Economy. And the Economy fails to advance. People lose trust in the Currency and, eventually, the Economy.
There is a common old notion that a weaker Currency might attract more external Buyers of our products/produce and services because the lower value of the Currency is tantamount to devaluation, which on paper makes products and services look cheaper to the outsiders.
However, we are all aware of the fact that devaluation doesn't always come with increased demand for our products. We saw that in the Busia era. We saw that in the J.J. era. No significant increase in the demand for our goods and services resulted from any of those devaluations. And even if we would be that lucky to have the market favorably respond to such decreased value of our Currency with increased demand for our Goods and Services, would we be able to take advantage of that level of demand to produce more and bag higher revenues? I seriously doubt that. Our Economy does not seem to be prepared to adjust rapidly to meet the increased demand that the weaker Ghana Cedi might engender. That is why many of us view the falling value of the Ghana Cedi with some trepidation. If we fail to meet the demand, when our buyers need our products and services the most, we induce them to look elsewhere for alternative suppliers. We then lose much of our customer base, our Clientele. We would then look to our trading partners as some unreliable supplier. As it is now, our Economy does not have much of inventory to keep fulfilling our customers’ demands. Our Human Resource repositories and Service providers are inadequately equipped to meet any sudden surge in the demand for our Services.
Then, also, we need to acknowledge that it is one thing if the Currency is, intentionally, devalued by the Government, and another thing, if it is, automatically, forced by the Market to drop in value.
While the former situation could only mean a strategic plan by the Government to attract greater demand for our goods and services, and does not necessarily reflect vital weaknesses in the Economy, the latter situation engenders suspicions and distrust of the Economy that tend to keep our external Clientele stalling, and locals, reluctant to save. The other stakeholders then begin to suspect there are certain unhealthy aspects to our Economy that is causing the Market to reject/devalue our Currency.
From my very modest layman's commonsense observation and experience, I can, reasonably, deduce that in our current situation, which conforms to the latter scenario, we might face a rush to buy and hoard, for fear that prices would rise with the fast decreasing value of the Ghana Cedi. Additionally, folks would be clamoring for foreign Currencies to preserve any value in their hard-earned money. That rush for foreign Currencies then by itself sets off a spiral of higher prices we must have to pay in Ghana Cedis to acquire them. That is, the foreign exchange rate keep increasing for all foreign Currencies, thus further devaluing the worth of our Currency.
The clamoring for foreign Currencies in turn puts pressure on the Government to secure more Foreign Exchange to meet the demand. And if the Government-assigned sources fall short of delivering, black market trading in Currencies then booms to the detriment of our Economy.
Therefore, we would like to hear from the Deputy Finance Minister what his specific plans are for, immediately, stemming the fall of the Cedi. It is only with convincing, specific plans to do so that speculative assault on our Currency Market could be halted, and investors’ confidence in our Economy could be restored and sustained. People need reassurance via concrete, believable plan of action capable of making immediate impact, not general notions, or open-ended methodologies.
Long Live Ghana!!
(G. K. Berko—New Hampshire, USA).