The Ghanaian government is being challenged to ensure that the recent record-breaking appreciation of the cedi is used to boost local manufacturing rather than just consumption.
For the first time in decades, the cedi ended the year with a massive 30% gain against the dollar. This unprecedented feat has already brought immediate relief to Ghanaians through lower prices for fuel and essential commodities like rice, sugar, and cement. However, experts warn that this success was achieved through significant sacrifice, including a $214 million loss from the Gold-for-Reserve (G4R) program, strict government spending cuts, and downwardly renegotiated public sector wages.
From Consumption to Competition
Speaking with The High Street Journal, Financial Management Consultant Dr. Daniel Seddoh argued that the current relief must be strategically directed toward productivity. He believes that focusing solely on the drop in fuel and grocery prices is a short-sighted strategy that fails to address Ghana’s underlying economic challenges.
Dr. Seddoh maintains that the true value of a stronger cedi lies in its ability to lower the cost of production. He suggests that companies should take advantage of the favorable exchange rate to import raw materials at a lower cost, efficiently process them into high-quality goods, and then export those products to generate fresh foreign exchange. He emphasized that the cedi’s appreciation can only be considered truly beneficial when it results in a more competitive export sector that helps shore up the country’s national reserves.
The Risk of a Short-Lived Success
While acknowledging that reduced fuel prices are vital for the average citizen, Dr. Seddoh warned that failing to translate these gains into the “real sector”, specifically agriculture and manufacturing will eventually haunt the economy. He charged the managers of the economy to ensure that the sacrifices made by workers and the losses incurred by the central bank lead to sustainable job creation through industrial growth.
Many economic observers share the fear that without a significant increase in local productivity for both domestic consumption and export, the current stability and lower inflation rates will be temporary. The call to action is clear: the government must move beyond celebrating lower prices and focus on building an economy that can compete on the global stage.
President Mahama recently appointed 11 prominent Ghanaians with rich economics and finance acumen in addition to his Vice Prof. Jane Naana Opoku-Agyeman, to constitute the Presidential Advisory Group on the Economy (PAGE). Many expects these experts to advise the president on the most effective way to see the real sector grow and create more job opportunities for the teaming youth while creating new government revenue sources.
