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Opinions of Thursday, 20 January 2005

Columnist: Afriyie, Bright Siaw

Currency Delimma ? Causing Brain Drain And Sluggish Economy

The endless Ghanaian currency depreciation presents one of the most unsustainable dilemmas in the daily lives of all Ghanaians. I have been reading news and articles originating from honest Ghanaian sources in which they mostly attempt to link this problem to the overwhelming corruption in the country. I think corruption is a byproduct and an indicator to a falling sluggish economy and not the vice versa. Can anyone throw light on the level of corruption in the Gold Coast era, and how it impacted on the power of the Gold Coast pound as against the level of corruption in this dispensation (Ghana), and how it affects the cedi power. I for one believe if we quench fire on the surface, it will rekindle and ignite with time. In short our problems will never be solved that way, only spinning our tails and resonating the visual cycle.

The urge that plunged into skepticism suggested the need for a crucial search for answers, which can be traced as far back as in 1987. I have been consistently asking fellow Ghanaians both residing in the motherland and outside: ?What would be their main reasons for leaving the motherland, Ghana??. For those still living at home almost 99% answered ?currency depreciation?. Then Ghanaians in Diaspora mostly answered ?currency depreciation? ? (97.5%) with only a handful of them answering ?Political Instability? (2.5 %). For the sample coverage, I am talking about most Ghanaians I met in 11 West African Countries during my 7years of service under the WHO-OCP, plus most Ghanaians I ever met in both North America and Europe. My choice of sample might be inaccurate, but I can assure you the motive behind most Ghanaians living outside the country would most likely be economical. Even asking further questions like ?do you want to go back?? The answer is always YES, BUT I AM NOT READY - Meaning the sluggish economy with the Currency at the focal point.

These honest responses certainly generate the necessary ingredients for a spontaneous call for further questions. WHY? Is Ghana really as poor a country as the world experts describe it? I will say NO, given all the rich mineral deposits ranging from Gold to Diamond, Cocoa and Coffee cash crops, hardwood of several varieties, great tropical forest, to name a few. Ghana is even very rich in human resources ? several elites with tremendous intellectual excellence and skills in various faculties. Yet we are still not counted, and our currency continues to depreciate exponentially.

Unfortunately, most Ghanaians will point figures on corruption as the key player, as I have already mentioned, diverting attention to the already powerless citizenry. Imagine a country in which the minimum wage is set at ?10,500 cedis a day and one-person meal selling between ?5,200 and ?25,000 cedis. Again the value of the currency is critical for all business? Albeit, Cedi without value ? substantiated by the ever rising inflation rate. Incidentally some leaders will enrich themselves in Swiss Bank and cry fowl on the poor and innocent Ghanaians. It seems obvious, given these circumstances for a police officer to accept bribes, for example 1,000,000 Cedis a week and let go a corruption case, as opposed to struggling with a daily wage of about ? 20,000 cedis.

I have been debating on this endless fall of our Ghanaian currency, and mostly attempt to peg it to a mirror reflection of derogative and mediocre governance. The premise can be substantiated by an excerpt from country studies, found in The Library of Congress - Country Studies obtained from website, a Ghanaian Information Resource, which I am now presenting to the good Ghanaian populace to seize the glimpse of the big picture and also ponder on the subject matter ? and appreciate a little history of the Ghanaian cedi.

It appears undisputable, that one of the most pressing economic problems faced by all post-independence Ghanaian governments is the overvaluation of the currency. The unit of currency is the cedi, which is divided into 100 pesewas. In 1961 Ghana broke with the British pound sterling and pegged the value of the cedi to the US dollar. As Ghana's terms of trade worsened in the 1960s, the real value of the cedi fell; however, successive governments feared either to float the cedi or to adjust its value, thereby raising the cost of imports and consumer prices. The overthrow of the Busia regime in 1971, following the introduction of a devaluation package, reinforced the unpopularity of such a move. The Acheampong government reversed course and revalued the cedi. It also increased the money supply to pay Ghana's debts, leading to a sharp divergence between the official and the real rates of exchange. It raises questions on whether Ghana was really ready for the independence in 1957.

The overvalued cedi, on the one hand, and low, regulated prices for commodities, on the other, led to a robust smuggling industry and to an extensive black market in currency. It became common practice for Ghanaians, especially those living along the country's border, to smuggle Ghanaian produce such as cocoa and minerals into neighboring francophone countries. After selling on the local market, Ghanaians would then return home and trade their hardcurrency Central African francs for cedis on the black market, making handsome profits. Smuggling and illegal currency operations had become so extensive by 1981 that the black market rate for cedis was 9.6 times higher than the official rate, up from 1.3 in 1972. At the same time, reliable estimates placed transactions in the parallel economy at fully one-third of Ghana's GDP. The establishment of the foreign exchange bureaus in 1986, and the government?s decision to relinquish its direct role in determining the exchange rate created business competition among authorized currency dealers, which somehow, reinforced the unpopularity of the black market.

Fifteen months after the PNDC came to power, in April 1983, the government began efforts to devalue the cedi. Mr. Rawlings introduced a system of surcharges on imports and bonuses on exports that effectively devalued the currency, because the surcharges on imports amounted to 750 percent of the amount being spent, and the discounts on exports amounted to 990 percent. Further, an official devaluation began in October 1983 in which the exchange rate reached ?90 to US$1 by March 1986. By 1993 ?720 equaled US$1, and by late 1994, ?1,023 equaled US$1.

I dare to deduce from the above that the ability to stabilize our currency to a reasonable dollar value will be a very good indication of a good governance that is determined to halt the exponential depreciation of the cedi, which is a commendable attempt to booster the economy. From all the ECOWAS countries to North America where I happened to interview Ghanaians why they leave the country.--- The answers are the same and simple: ?Cedi is almost useless?. Most people believe, they will be better-off performing manual jobs for descent wages than performing clerical or professional jobs and not being able to cover a single lunch meal for one family. In addition, the little FCFA, Dollar, Dutch Marks, or the Pound Sterling that will be earned will exchange for a huge amount of our local Cedis which in most cases, can pay for over ten times the same amount of work done in Ghana. This premise is true given the trend of depreciation of our currency since the time of independence and even worsened by several military coup d?Etats. The drum here turns to highlight the uncontestable fact that being attracted by these powerful currencies for the so-called ?green pastures?, seemingly equates the opportunity cost for not directly contributing one?s quota to the development of our dear country at this crucial time. ? Some may argue that we send dollars home every year. -----mmmhhh. A little more with your powerful brains and know-how will also make a tremendous difference.

The table below illustrates the depreciating trend of our Ghanaian Cedis from 1986 up till now.

 Year	Cedi Value To Us$ 1	        Head Of State 
March 1986 ? 90 President Rawlings
January 1993 ? 720 President Rawlings
October 1994 ? 1,023 President Rawlings
January 1996 ? 1,623 President Rawlings
January 1997 ? 2,050.17 President Rawlings
August 1998 ? 2,314.15 President Rawlings
August 1999 ? 2,647.32 President Rawlings
January 2000 ? 5,321.68 President Rawlings
December 2000 ? 7,650.00 President Rawlings

January 2001 ? 7,705.00 President Kuffour
January 2002 ? 7,765.00 President Kuffour
January 2003 ? 7,876.00 President Kuffour
January 2004 ? 8,376.00 President Kuffour
December 2004 ? 8,826.00 President Kuffour
The figures speak for themselves. The honest Ghanaians can now identify the deceptive hitches and appreciate the good work of our leaders. Folks, we have a long way to go to bring the cedi back to even 90 cedis to US$1 equivalent. Notwithstanding the hardship involved to comment on our visionary $1000 per capita income in the year 2012.

Unless proven otherwise, by comparison, a great deal of harm had been done to our currency in the time of Mr. Rawlings as the President of the Republic, by dragging us from 90 Cedis to US$1 exchange value in 1986 to 7,650 cedis to US$1 in December 2000. The experts should tell us what percentage of depreciation was set in from 1986 to 2000. Unfortunately, the ex-President had two decades to resolve this currency dilemma, but the cedi depreciation rate grew from bad to worse to such an alarming pace.

The scanty depreciating rate of 4.7% as observed from 2001 to 2004 obviously sends some good signals to begin an end to the currency drum. I encourage President Kuffour to accelerate his political endeavors to pursue this vision to carve the currency dilemma.

I will commend the ten items below for consideration: 1. Develop policies to attract Ghanaians in Diaspora back home

2. Public Safety apparatus must be prioritized and officers be given the appropriate training and the proper tools to operate efficiently

3. Reengineer the redundancies in the normal Government administrative processes.

4. Encourage Business transparency in government institutions through the use of information technology.

5. Street naming must considered as crucial as public safety business to facilitate the implementation geographical information systems.

6. Double efforts in external debt relief negotiations, as opposed to loan seeking. 7. Encourage small businesses locally

8. Device means to match fuel and cocoa prices and other produce with prices in neighboring countries to discourage smuggling.

9. Campaign for public honesty and accountability.

10. Time to look into the educational systems and discuss a possibility for a common native language in addition to the English language.

Bright Siaw Afriyie,
IT Professional,

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.