Business News of Monday, 10 February 2014
Ghanaian Economist Dr. Theo Richardson says Ghana’s economy will crash by June this year if the Bank of Ghana continues with its kneejerk measures to rescue the cedi.
“The government is facing liquidity problems and if we don’t get the appropriate remedies to address the issues at hand the situation may worsen and by June the economy may crash,” Dr. Richardson said.
He stressed: “I said if they don’t address the fundamental problems facing the economy, by June the country’s economy will crash because the government has not even paid University Lecturers since last year among other pressing issues which needs to be address.”
Dr. Richardson was speaking on Adom News about recent measures announced by the central bank save the cedi from falling further, after an all time 7.2% depreciation against foreign currencies.
As part of the measures, the BOG ordered all commercial banks not to issues cheques and cheque books in foreign currency again, not to give loans in foreign currency again, and to allow business people travelling to cash on only US$10,000.
But Dr. Richardson said the BOG should have given about three months notice to the dollar account holders, particularly importers and exportes, so they could get enough dollars for transactions, instead of stopping dollar transactions with immediate effect.
He described the BOG’s directive as “very harsh” for businesses, adding that it has a potential of crashing the economy by June if they are not reversed quickly.
Dr. Richardson explained that the BoG’s new policies would force investors and business men and women to take drastic steps that could make things worse for the economy.
He noted for instance that the US$10,000 ceiling for people travelling will only boost a foreign exchange black market, and cause the dollar rate to go even higher.
Meanwhile, the Central Bank has increased the Monetary Policy rate from 16% to 18%, which means banks can now borrow from the central bank at 18% interest rate, which now threatens to raise interest rates on loans as well.
Dr. Richardson believes the BOG and government need to rethink the measure they are putting in place to revamp their economy because those measures are rather threat.
Meanwhile, MP for New Juabeng South, Dr. Mark Osei Assibey, who is also an economist agreed with Dr. Richardson, saying that the measures the BOG announced were “antiquated” and rather pose a danger to the future of the economy.
He said: “BOG has brought back 1983 measures put in place by the Rawlings government to save the cedi but those measures did not work and they will not work now.”
Dr. Assibey Yeboah noted that it is normal for the cedi be under pressure at this time of the year, when importers are cashing lots of foreign currency to go pay for goods the credit for the Christmas holidays.
He said an effective economic management team should be aware of this and know what steps to take ahead of time to keep the depreciation at a minimal level.
“Some depreciation occurs in the cedi around this time of the year but this year it is 7.2% and that is unacceptable,” he said.
The BOG recently pumped some US$20million into the economy as part of measures to boost the cedi, but the MP said the BOG needs to do more than that because US$20million is not enough to meet the needs of even one company.
“They must pump more of our foreign reserves into the economy – I don’t know what they are stashing the foreign reserves for – this is the time for them to fall on it to save the cedi and the economy as a whole and quit this antiquated measures,” the MP said.