Spokesperson for Dr Bawumia, Gideon Boako, has said the NPP government should be commended for improving on the rate of the cedi’s depreciation, despite that fact that Ghc5.00 is almost equal to one dollar.
The economist, who was speaking on Citi TV’s Point of View, said the rate of the cedi’s depreciation is much better as a result of some government actions, compared to the previous administration.
“What is important is that whatever the depreciation was at the time is not the same as today. That is why if someone has been able to reduce the rate of depreciation from a point of 31 percent to 6 percent, you do not just be ungrateful to that person and say he has not done well.”
“It means that given the chance, that person has what it takes to take you to a point where you have zero depreciation and you can think of how to grow up. That is the most important. If you do not situate the argument within that context, you will just be comparing the nominal figures,” said Dr Boako.
“It is important to also note that in so far as we don’t run a fixed exchange rate regime, depreciation is something that will be difficult to say you won’t see it at all. You try as much as possible to contain it and make sure you appreciate. But given the structure of our economy right from Guggisberg’s time to Nkrumah till today, the structure of the economy is such that we are mostly net importers, and so the trade accounts issued will affect our local currency at all times. We also have huge exposures to foreign investors in the country – those who are doing retail businesses and the likes so they repatriate money outside and all of these will have an effect on us” he added.
According to Dr. Boako, unlike in the case of the NDC administration at the time, the NPP’s economic fundamentals remain strong considering the rate of the cedi’s depreciation vis-a-vis the rate of inflation.
“If your rate of depreciation is higher than your rate of inflation, it means your fundamentals are absolutely weak. If you are able to achieve a rate of depreciation that is lower than your inflation, then it means your fundamentals are supporting. As at the time, we were having inflation rate less than 30%, and still we were depreciating by 31%. You can’t have a strong fundamental and at the same time, have an exchange rate depreciation that’s higher than your rate of inflation.”
“Today, we have a rate of inflation of around 9.8%, and we’re depreciating at less than 7%, less than that particular inflation rate. It tells you that, had it not been the strong fundamentals that are anchoring the exchange rate, we would be depreciating more than our inflation because inflation is key in the determination of exchange rates. If you want to determine the exchange between a particular currency and the other, it is the inflation differential between the two countries that trade in that particular currency”.
Credit: Citi Business