Experts at the Danquah Institute Economic Forum have proposed a raft of measures to government, including introduction of an exchange rate stabilisation levy as it seeks to prevent the country’s ailing economy from deteriorating further.
They also called for rationalisation of government expenditure by allowing state-owned enterprises to stand on their own, easing the burden on government spending in the process.
Speaking at the forum, themed ‘Restoring Macroeconomic Stability and Sustainable Economic Growth: Our Collective Responsibility’, Dr. Kwadwo Opoku, Public Sector Economist at the University of Ghana, blamed Ghanaian importers for the cedi’s continuous depreciation.
The cedi has lost about 53.8 percent of its value since beginning of the year, according to government’s 2023 Budget Statement and Economic Policy.
Compared to the cedi’s average 7 percent annual depreciation between 2017 and 2021, the current year’s depreciation – which is driving the high cost of goods and services – is the worst performance among 148 currencies tracked by Bloomberg.
Also, losses the cedi suffered against the US dollar and other major trading currencies contributed to annual producer price inflation (PPI) reaching a new record high of 65.2 percent year-on-year in October of 2022 from 45.6 percent for the previous month.
To reverse this trend Dr. Opoku called for effective management of the country’s exchange rate regime devoid of politics; and allowing it to correct itself rather than running to the Eurobond market for loans to shore-up the cedi from depreciating against the US dollar and other major trading currencies.
“When we allow the exchange rate to be low, we are subsidising import and taxing exports. So, we are taxing people who export and subsiding those who import; thus creating jobs in other countries because they will produce more in order to meet our import demands. That’s what happens when you make the exchange rate very low,” he stated.
He further proposed that government should be courageous to impose what he termed an ‘Exchange Stabilisation Levy’ on purchasers of dollars for foreign exchange. This, according to him, will be used in shoring-up the cedi during depreciation periods instead of going for loans to shore up the currency.
On his part, Economist Dr. Adu Sarkodie called on government to tax areas of the economy that are doing well – the services sector, which is contributing over 50 percent of the GDP; the extractive sector and agriculture, as well as telecommunication, to raise revenues the country needs instead of relying on loans.
He also urged government to pay attention to natural resources if it wants to transform the economy.
“Use the natural resources to transform your economy. Botswana has 55 percent share of their diamond production, Nigeria has 51 percent share of their oil production, and Ghana has only 16 percent of our extractive sector; so, we are not making a lot out of this,” he said.
Dr. Sarkodie also called for easing rigidity in the recently read 2023 Budget Statement and Economic Policy, explaining that it does not allow space for discretionary expenditure which directs government policies.
“The District Assemblies Common Fund, Road Fund and NHIS don’t give government so much room to manoeuvre. So, let’s reduce the capping and create more room for discretionary options so that government can use the discretionary expenditure to direct policies,” he said.
He further suggested that state-owned enterprises must be encouraged to generate their own revenues and also be responsible for their own debt or liabilities.
For the Executive Director of the Danquah Institute, Dr. Antoinne Tsiboe-Darko, there is a need for human-centred policies that will bring about recovery and impact more positively on the citizenry.
“We need to provide safety nets to ensure that the poor and vulnerable are covered,” she said.
