Ministry of Finance and the Bank of Ghana (BoG) are expected to form a bipartisan committee to investigate the structural causes of the depreciation of the Ghana currency, (The Cedi).
Mr. Ofori-Atta stated that even though the cedi suffered some depreciation against the dollar its quick recovery shows that the fall was not due to macroeconomic fundamentals.
“It is clearer from the data that the depreciation of the cedi was not due to weak economic fundamentals but rather a combination of structural rigidities and apparent speculative behaviour of portfolio investors”
He argued that the recovery of the cedi which begun before the inflow of the Eurobond cash demonstrated that the fundamentals were still strong.
The Finance Minister was speaking on Ghana’s successful completion of the International Monetary Fund (IMF’s) Extended Credit Facility, the Ghana’s historic $3 billion Eurobond, and recent developments on the foreign exchange market and the Ghanaian cedi in on the floor of parliament, Thursday, March 28, 2019.
According to the Minister, he had been tasked by President Nana Addo Dankwa Akufo-Addo to investigate the structural causes of the fall in the value of the cedi in comparison to major international trading currencies like the US Dollar, British Pound and the Euro.
The cedi has seen some depreciation from the beginning of the year until the second week of March when the local currency started making some gains.
Mr. Ofori-Atta said the government is very much aware and is taking steps to control the free fall of the cedi.
“The Governor and I will put a bipartisan committee together to proceed immediately,” he said, while recounting President Akufo-Addo’s instruction for a structural investigation.
He stated that the Bank of Ghana will remain vigilant in the short term to build adequate reserve buffers and promote macro discipline in the forex market.
The minister spoke about the need to promote export and reduce import as well as diversify the country’s trade.
He also encouraged the patronage of locally made goods like kenkey, waakye, saying “we need to grow more, manufacture more.”
High participation of foreign investors in Ghana
The Finance Minister reiterated that the high participation of foreign investors in Ghana’s recent issue of three billion dollars Eurobond confirms investor confidence in Ghana.
Comparing the three billion dollar bond to the last bond of 750 million dollars raised under the Mahama administration, Mr. Ofori-Atta argued that government got a better coupon rate, a positive sign at a time Ghana was exiting an IMF programme.
“The last Eurobond of the previous government of 750 million dollars was issued in 2016, the order book was four billion dollars over five times larger. But this came at a high cost of 9.25 percent for six years,” Mr. Ofori-Atta recalled.
He pointed out that compared to this year’s bond of 7.785 percent for a seven-year bond, the government has done well in pricing its bonds.
Mr. Ofori-Atta noted that with about 20 percent oversubscription, the international investment community was telling the government that it is safe to invest in Ghana.
Three billion dollars Eurobond is also expected to further strengthen the cedi.
However, the Member of Parliament (MP) for Ketu South, Fiifi Kwetey, in his contribution refuted claims by the Finance Minister, that the NDC government signed up for a three-year IMF Extended Credit Facility in 2015 to fill a $930m gaping hole in the economy.
He argued that the figure put out by the Finance Minister was ridiculously to have compelled the NDC government to invite an IMF bail-out.
He stated that the NDC administration under John Mahama had spent much more on infrastructure to consider a lack of $930m great enough for an IMF bail-out.
Mr. Fiifi Kwetey, who was also former Deputy Minister of Finance, described the New Patriotic Party (NPP) government celebration of Ghana’s exit from the IMF a “whole pretence.”
He said the attempt by the NPP government to claim a crown of “economic messiahship” as Ghana leaves the IMF programme in 2019 was deceptive.
Mr. Kwetey said, history did not give the NPP that tittle because shortly after leaving the IMF in 2006, the NPP government under President John Kufuor, suspended fiscal restraint and embarked on reckless spending.
He said despite a budget deficit target of about 4 percent in 2008, the NPP government hit a 15 percent deficit, an 11 percent miss, which he described as the highest in history.
“Your history shows you have gone out of IMF before, but the mess you left in two short years after completion was absolutely terrible,” he added.
Newsdesk report by Ruth Abla Adjorlolo