Dr. Daniel Amateye Anim Chief Economist at PIED Africa has said that Ghana’s excessive reliance on imported goods and services plays a crucial role in the depreciation of the cedi.
He said the country’s high volume of imports relative to exports has led to a significant trade deficit, putting pressure on the local currency.
He attributed the situation to high import bills such as industrial raw materials, non- food products and food items. He also said the cedi’s value is highly inflated due to fluctuations in the global commodity prices and foreign exchange rates.
Speaking on export, he said Ghana’s production is low therefore must have the competitive urge to produce what is imported to stop food imports.
“When Ghana depends on more importation it depletes foreign reserves and attracts inflation and pressure on the local currency”. This, he explained that when you are importing more foreign goods and services, more money must be pumped into for buying, therefore, Ghana would be forced to use its reserves for imported commodities.
Speaking on the recent consumer price index and inflation report, he said import goods recorded 17.6%, especially on food and vegetables, “this depicts how agricultural plays a vital role in the growth of the economy”, he added
Addressing issues in the agricultural sector, he said policies and measures must be implemented fully to achieve sustainable agricultural production.
He said farmers must be given adequate resources such as loans to be able to purchase agro chemicals, or farmers must be given fertilizers and farming equipments on credit to avoid being constrained by financial difficulties.
“Increase in the prices of goods and services, is due to the high cost of seedlings and fertilizers which are minimizing farmers outputs”, he added.
The Economist said, “the planting for food and job is a good policy on paper but in terms of implementation it was not fully implemented, also the 1 district 1 dam was good but it was just a political stunt that was why it was not implemented extensively to address food security”.
He said government must devoid such initiatives from political actions to be able solve food security issues effectively.
He said Ghana must invest in storage facilities and also provide systems to ensure value is added to our commodities. Ghana must also leverage on basic technologies to improve food production.
However, the depreciation he said, has made imports even more expensive, further exacerbating the trade deficit. Adding that, the situation is expected to worsen during the holiday season, with increased demand for foreign goods likely to drive up the value of the dollar.
In September 2024, the cedi depreciated by 24.3% against the dollar, compared to 21.3% in August 2024. However, the local currency lost 3.95% against the US dollar in October 2024, taking its year-to-date depreciation to nearly 29%.
Interestingly, getting closer to the end of the year and an election week, The cedi recently appreciated to about 15.90 to a dollar. This happened after an aggressive intervention by the BoG in the foreign exchange market.
The Central Bank in mid-November pumped US$40 million into the interbank marketing leading to the boost in the cedi’s value.
However, experts have said that the gains made by the local currency are a deliberate move orchestrated by the Bank of Ghana (BoG) to create a facade of economic stability ahead of the 2024 General Elections.
Dr Anim said agriculture has been the back bone of the economy therefore, must be invested and prioritized for country development.
