Dr. Mahamudu Bawumia, the Vice President, has attempted to explain the Ghana cedi’s problems.
Negative credit ratings, difficulty in passing the 2022 budget, and investors’ refusal to roll over their money in Ghana’s economy, among other things, are to blame for the cedi’s woes, according to the head of the government’s economic management team.
Fuel prices on the worldwide market, as well as the Russia-Ukraine conflict, contributed to the Ghanaian currency’s difficulties, according to Dr. Bawumia.
According to Bank of Ghana data, the cedi fell by 14.6 percent against the US dollar in the first quarter of 2022, while Bloomberg dubbed the Ghana cedi the world’s worst-performing currency.
Ghanaians, particularly social critics, had pressed the Vice President to speak out about the cedi’s freefall versus major trading currencies.
On Thursday, April 7, 2022, in an event co-hosted by the Danquah Institute and the NPP’s TESCON, Dr. Bawumia, who has been dubbed an “economic messiah” by supporters of the ruling New Patriotic Party, took time to explain what he believes caused the cedi’s fast slide and the country’s fragile economy.
“Unfortunately, the financial markets’ assessments of the 2022 budget decided that our predicted 40% rise in revenue, which backed the budget, was unlikely to occur, resulting in an increase in our deficit.”
The tumultuous budget debate in Parliament and the passage of the budget did not improve matters. This caused uncertainty and sent a signal to the market that the administration might not be able to get most of its programs passed in such a tight-knit legislature. Investors’ lack of faith in the budget was exacerbated by this.
Furthermore, delays in enacting key tax reforms…appeared to bolster the view that the market will struggle to pass its programs. To add to the unfavorable market mood, Fitch and Moody’s downgraded the country’s sovereign credit rating due to worries about budgetary and debt sustainability.”
Foreign investors have been unwilling to roll over their holdings of Ghana’s foreign bonds as a result of these concerns, according to the Vice President.
He went on to say that Ghana’s decision not to issue a sovereign bond in 2022 alarmed investors and conveyed a negative signal about the country’s foreign exchange reserves.
“As a result, they [investors] sought to grab a hold of the foreign exchange now, which fueled market demand for the US dollar.” The cedi became unappealing as interest rates in the United States and other economies rose. Then there was the confrontation between Russia and Ukraine in February. The local foreign exchange market is also under pressure as a result of the associated fuel price hikes.”
