The recent crossing of the GH¢16 mark against the dollar on the retail market has sparked widespread concern among Ghanaians far and wide.
Invariably, this translates into higher prices for imported goods, increased cost of living, and reduced purchasing power. For import-reliant businesses, the cedi’s weakness threatens their profitability and sustainability, as well as potential job losses.
As for its broader macroeconomic implications, the Bank of Ghana’s ability to manage monetary policy effectively is compromised – which will eventually lead to rising interest rates, reduced investment and slower economic growth.
Apart from eroding individual wealth, it has far-reaching consequences for the economy as a whole; leading to increased poverty rates, exacerbating social inequalities and potentially triggering social unrest.
Already, a financial advisory firm, Bridgewater Advisors, says Foreign Direct Inflows in 2023 was the lowest over the past decade and 28% lower than pandemic levels.
Meanwhile, reduced foreign direct investment (FDI) can stifle job creation, technological transfer and overall economic development, further entrenching the country’s reliance on external financial assistance. A weakened cedi undermines Ghana’s attractiveness to foreign investors.
The current economic challenges demand urgent and comprehensive policy responses. Finance Minister Dr. Mohammed Amin Adam also attributed rising debt levels to depreciation of the cedi.
Indeed, stabilising the cedi requires a multifaceted approach that addresses both symptoms and root causes of the currency’s volatility. It must begin with efforts to reduce the trade deficit, prudent fiscal management and strategies to attract FDI.
As the country approaches its 2024 elections, we believe aspirants must give rise to serious introspection and commit to engaging in honest and transparent communication with a view to surmounting the economic challenges which have engulfed the nation.
It might not be far-fetched to say the cedi’s weakness is a reflection of the broader socioeconomic and political landscape. Therefore, its restoration to health should have profound implications for the country’s economic stability.
