Prime News Ghana

Gov't explains the need for FX Development Committee to probe cedi depreciation

By Justice Kofi Bimpeh
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Government has explained the need for a Forex Development Committee to look into the recurring depreciation of the Ghanaian Cedi.

A spokesperson for Vice President Dr Bawumia, Dr Gideon Boako in an interview with Citi FM on the need for the committee said the government takes a serious view of the recurring depreciation of the cedi and has decided to handle it head-on.

According to him, the issue with the depreciation of the cedi is a structural problem that needs a long term solution, hence the establishment of the committee.

"The Vice-President believes that the currency matter must be handled head-on and it's basically a structure problem and not so much to do with the day to day forex issues, of course, they are other components of what brings back the issue of depreciation that has to do with day to day forex issues but structurally.........characteristically you will see that our currency over the years has seen some level of depreciation even though there are sometimes uptake."

READ ALSO : Management of the Cedi under Akufo-Addo, Bawumia has been the best since 1992 - UDS lecturer

Dr Gideon Boako explained that the Vice-President believes that despite the various measures put in place to contain the speed of depreciation more needs to be done.

"He (Vice-President Dr Bawumia) believes that despite the effort that the government has put in place to contain the speed of depreciation that is more need to be done and I said this in the context that as we have earlier alluded to if you look at the trend from 2016 to 2017 to 2018, 2016 seen a depreciation of around 9.7%, 2017 we had somewhere around 4.8% and in 2018 we had somewhere around 8.7%, structurally last year that is 2019 we saw some......... that saw us end the year around 12%. It is right when you say that the 2019 figure gives an indication that we are reverting to the old trends of 2014/2015 where we saw a depreciation of  21 or 35% or so...."

Speaking on why the cedi saw some sharp decline against major trading currencies in last year, Dr Gideon Boako said, "But the explanation is that on the 3rd of April when we had a town hall meeting and up to the 3rd of April there have been some sharp depreciation of the currency and almost everybody was in a state of confusion didn't know what was happening but on the 3rd of April that explanation was given that before we existed the IMF programme there were few conditionalities that were put in place and one of such key condition was we needed to build international reserve to a certain point until we do that we could not intervene in the forex market and that is why somewhere from the mid of February 2019 to the end of March we saw the currency falling because government could not anything......"

READ ALSO : Current Cedi depreciation is due to the collapse of confidence in the Economy – Ricketts-Hagan

Forex Development Committee

Government through the Finance Ministry last week established a Forex Development Committee that will look into policy measures and interventions to prevent the recurring depreciation of the cedi from assuming the impact of the central bank.

The move follows a promise made by the Finance Minister, Ken Ofori Atta last year that government would establish a bipartisan committee to investigate the structural causes of the cedi depreciation and propose adequate measures.

The membership of the committee, however, is drawn from the Office of the Vice President, Bank of Ghana, Agriculture Ministry, Ghana Union of Traders Association (GUTA), Association of Ghana Industries, some universal banks among other key stakeholders.

The Deputy Finance Minister, Charles Adu-Boahen, speaking at a press briefing in Accra to inaugurate the committee explained that the mandate of the committee is to review the current Forex (FX) regime, offer workable alternatives by way of policy interventions which potentially would reduce FX risks in the economy and also identify the inherent constraints in the system.

"The FX Development Committee which is chaired by the Finance Minister, Ken Ofori-Atta is also to critically look at the role of automation and digitization as a critical enabler of FX reforms," he said.

Adu-Boahen added that; "The formation of this committee is not to infringe on the independence of the central bank in its foreign exchange operations and if anything at all, the work of the committee is to complement the efforts of the central bank in curtailing the usual poor performance of the cedi against its foreign counterparts."