Hi guys, hope your having a pleasant day.
Since I arrived in Ghana about 7 months ago, the rate of the Ghana currency (cedi) has been extremely volatile and has just got weaker and weaker against the major currency’s (dollar and pound). When I first got to Ghana it was £1 = 4.9Ghc then over the months it depreciated all the way to £1 = 6.3Ghc (in August 2014) but of late it is beginning to get stronger (only slightly though). So today the rate stands at £1 = 5Ghc.
Fuel increased a few months ago which lead to the increase of transport fares, building materials, pure water….literally everything increased!
The government has introduced a number of measures like tax hikes and if you have a dollar or pound bank account in Ghana you cannot withdraw your money in those currency’s they will only give it to you in cedis at the banks rate…which is usually lower than that of forex bureaus. They would only allow you to withdraw your own currency if you showed them a travel document of when you were leaving Ghana so you could take your funds the day before you left Ghana. This measure was hugely criticised as too restrictive and counter productive and In my opinion this was a seriously poor attempt at helping to restore the economy.
So here are my 5 reasons why Ghana’s economy is in a bad state:
1. They use Dollars as a currency, when their currency is cedis! It’s ok using the dollar as an option as it is a major currency but places like hotels were using that as their currency. Most people get paid wages in cedis so how does this help anyone apart from creat a serious divide amongst people. Recently the government out lord the use of quotations in dollars, but this hasn’t made a difference at all because all companies are going is transferring the dollar into cedi and give you that price in cedis which is still expensive….so in affect that was helping nobody.
2. There is a growing demand for foreign products. Ghana import a hell of a lot of things so with the weak cedi to the pound/dollar rate, that drives up all the prices of items because business now have to buy their stock at higher costs too which is of course passed down to the customers. Then when the cedi stabilises and becomes stronger the items are not reduced to reflect this so the customer ends up paying even more for the items. Why are the made in Ghana companies not booming? We need to support our local products instead of thinking foreign is better.
3. Ghana accumulated debts at an alarming rate. The total public debt of Ghana was 9.5 billion cedis in January 2009 but it now stands at about 44 billion cedis (49.5% of GDP). Between December 2012 and August 2013 the government added 8.8 billion to the public debt, so this would mean Ghana was borrowing at a rate of 1.1 billion Ghc per month. This is just ridiculous and unsustainable (source: www.newpatrioticparty.org) Where is all this money going…excessive and illegitimate expenditures? I defiantly believe the economy has been mismanaged.
4. Ghana’s Stock Exchange has been ranked as the third worst performing market in Africa after Mauritius and Zambia. The manufacturing sector is currently the worst performing sector on the stock market due to several taxes companies are being charged. Foreign investors need something to be done to ease the taxes they are hit with in order for them to reduce their operation costs so their stocks can perform better.
5. Decline in the largest exported products. The price of Gold (Ghana’s largest source of foreign exchange) lost more than a third of its value back in 2013 so had an impact on the economy going forward. The price of Cocoa, Ghana’s second largest export generator has continued to decline. However, you would have thought that everything would have balanced out and Ghana would be big pimping right now with the oil discovery back in 2010, but unfortunately production has still not reached the expected level of 120,000 barrels per day but I’ve read that in the first years of discovery, 90-95% of funds goes to the petroleum companies in order to cover their investment anyway, not the state/country.
At first I was thinking the cedi depreciation was a good thing because instead of getting 3Ghc for £1 (in 2013) I was getting 6Ghc (in Aug 2014), but then I started to see everything that I was buying was also increasing at an alarming rate. Like cement went up from 18ghc (Jan 2014) to 38Ghc (in Aug 2014). So getting loads of cedis for my pound was relative to the price of items so ‘getting more for your pound/dollar’ doesn’t really make a huge difference.
With such a volatile currency, I’ve honestly had days where I’ve thought…is the only way Ghana? This is enough to scare anyone one back to their previous country, but that thought soon passed and I was thinking of solutions to the problem instead like having a business that doesn’t rely on foreign purchases because this can really mess you up.
What are your thoughts on the economy in Ghana?