President John Dramani Mahama and his government’s target of achieving and maintaining a 5% depreciation of the cedi per annum has been met with great optimism from experts who maintain that the target is not only achievable, but it is highly realistic.
Economist and lecturer at the Academic City University, Dr. Paul Appiah Konadu, believes in the vision of the president and his government. He, however, adds that if this is to be achieved, then the government must take practical steps to control its import bill.
He tells The High Street Journal that the government has already made encouraging progress in this regard, recording budget surpluses in the primary balance. This, he explained, means Ghana is borrowing less and is no longer exposed to the heavy pressure of external debt servicing.
“It is possible. It is highly achievable because, for some time now, we have been achieving budget surpluses,” he remarked.
He continued, “What that means is that the government, in terms of the primary balance, we are having a surplus, which probably suggests that the government is not borrowing so much. And now that we are not even borrowing from the external markets, there wouldn’t be so much pressure in terms of servicing external debts, which is good, and which will reduce the pressure on the cedi.”
But Dr. Appiah Konadu pointed out that the main challenge lies not in government expenditure but in the country’s high demand for foreign exchange to import goods that can be produced locally.
He recommended that if Ghana manages to cut back on certain imports, the cedi can stabilize and even appreciate at certain times of the year. He insists that key items such as fuel, rice, sugar, fish, maize, etc, if their imports are checked, will make the target easily achievable.
“What we need to do is to check our imports. Just as I’m saying, if we’re able to check imports of fuel, for instance, $400 million saved, then we check imports of poultry products, some $400 million saved per annum. We check imports of fish. We check imports of maize and imports of rice,” he told The High Street Journal.
He stressed that, “We’ll be saving ourselves so much from the pressure that is on the cedi because of the demand for dollars to import. So it is possible. It is possible.”
Dr. Konadu further noted that the cedi’s performance in the first five months of this year, where it appreciated by about 42.6%, proves that stability and even strength are possible. “It shouldn’t always be depreciation,” he said, emphasizing that with effective management, the net depreciation can be contained within 5% or less every year.
Many analysts and economists have stressed that a more stable cedi would be transformative for the economy, businesses, and households. For businesses, it means greater certainty in planning, reduced cost of importing raw materials, and protection of profit margins.
For households, it translates into slower increases in the prices of goods and services, particularly imported food items and fuel, which directly impact transport fares, utility bills, and the cost of living.
To make this a reality for businesses, households, and the general economy, Dr. Appiah Konadu maintained that with the right discipline on imports and continued fiscal prudence, the target will not be a mirage; it will be manifested.
