Weakening of the Cedi partly due to politicians hoarding dollars – Economist

An Economist and Lecturer at the Pentecost University, Dr. Alexander Amoh Baffuor has attributed the weakening of the Cedi against the Dollar partly to politicians hoarding Dollars in their homes.

According to him, many politicians ahead of the December 7 election are keeping huge amounts of dollars to be used for their campaign operations subsequently, a situation which he contends has contributed to the weakening of the Ghana Cedi.

The Ghana cedi is in a record-breaking weakening cycle, depreciating 14 per cent against the dollar this year, fueled partly by foreign exchange (forex) supply shortfalls. The local currency, which was trading in January at GH¢11.97 to a dollar on the interbank market and at GH¢12.33 in the retail market, is currently being bought at GH¢13.9000 and sold at GH¢13.9140 to the dollar at the interbank rate as of last week.

At some forex bureaux in Accra, the dollar is being bought at GH¢15.00 and sold for GH¢15.30. According to the Bank of Ghana’s (BoG’s) January 2024 Summary of Economic and Financial Data, the cedi started 2024 better than the same time in 2023, when it lost 20.6 per cent to the US currency, and in 2022, the cedi depreciated by 30 per cent against the dollar.

Speaking to Daakyehene Ofosu Agyemang on New York-based Adinkra Radio, Dr. Alexander Amoh Baffuor proferred some measures he believes will help strengthen the Cedi.

“In the short term, the government should overhaul its expenditure, cut down on unnecessary spending. The government must only spend into strategic investment. The government must be intentional about using stuff produced here in Ghana rather than importing them. We have to start something, we should solely depend on things in Ghana we have advantage of. Commodities like cocoa and gold should be exported more to so that the country can earn more dollars.”

Dr. Alex Amoh Baffuor also stated that a crackdown on black market dealers will not impact positively on the exchange rate of the Cedi to the Dollar.

“Chasing out black market dealers will make the issue with the struggling Cedi worse. The black market even though they operate illegal, they support the system. When people go to the bank and don’t get the dollar to buy, they turn to the black market where they get what they want. When people go to the black market and they get what they need, the exchange rate becomes stabilized.”

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