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Depreciation of cedi was not due to weak economic fundamentals-Finance Minister

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The Minister of Finance, Ken Ofori Atta has dismissed the assertion that, the abysmal performance of The Cedi against the major currencies was due to weak economic fundamentals.

Mr. Ofori Atta in a statement to Parliament, said:, “The poor performance of The Cedi which is yet to recover, was not due to weak economic fundamentals but rather a combination of structural rigidities and the apparent speculative behaviour of portfolio investors and market participants”.

“This turbulence happened despite the strong economic fundamentals and improvement in our balance of payments; which our Government has achieved in the last 2 years”. That’s according to Mr. Ofori Atta.

He continued: “We have done a lot of work to ensure that the economic fundamentals are robust and able to support economic growth and transformation.”

Adding that: “This is further evidenced, for example, by the following statistics

  • Inflation declining from 15.4% in 2016 to 9.31% in 2018
  • Fiscal deficit falling from 6.5% in 2016 to 3.9% in 2018
  • Interest rate on 91-day Treasury bill from 16.3% in 2016 to 14.6% in 2018
  • and Current account deficit from 6.6% in 2016 to 3.2% in 2018”.

It is also noteworthy that while this is a challenge, the Cedi has however, performed better over the last two years than when compared specifically to 2012 to 2016.

According to him, in 2012, the Cedi depreciated by 15.95%, 12.81% in 2013, peaked at 32.4S%-in 2014, halved to 15.68% in 2015 and depreciated by 9.65% end 2016.

Cumulative depreciation from 2012 to 2016 was 65.423%. Between December 2017, through the whole of 2018 to March 21, 2019, the cedi had depreciated by 17.325% compared to 25.33% in 2015 and 2016.

Mr. Ofori Atta stated that, the Cedi recovery had started even before the Eurobond was issued, and if I may add, before the Vice President’s trip to India. “But what the Eurobond issuance did was confirm the confidence investors have in our economy, with their $21 billion rush, which supported the recovery; possible because of our successful macroeconomic turnaround as well as the implementation of various policy measures”.

But in sharp rebuttal, The Minority Leader and MP for Tamale South disagreed with him and said, “the depreciation of The Cedi, Blomberg still report that at the end of February, The Cedi was the weakest performing currency in Sub-Sahara Africa, GHc5.45 against US$1.00, “that means that commitment on interest payment will natural go up so if government estimated 6 Billion as interest payment is likely to become 17 or 18 Billion how is government going to raise additional 1 billion in order to offset it, therefore to describe the appreciation as impressive is neither here nor there”.

Story by Edzorna Francis Mensah

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