Govt is a major beneficiary of Cedi depreciation – John Kwakye

The government is benefiting from the fall of the Cedi against the Dollar, Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has said.

The benefits, he explained, come in the form of increased cedi-valued import taxes and oil proceeds.

In series of tweets, Dr Kwakye said “Government is a major beneficiary of the huge cedi depreciation in the form increased cedi-valued import taxes and oil proceeds.”

He added “The sharp cedi depreciation must be bringing windfall revenue to Gov’t from higher cedi-value import duties and oil proceeds. This should partly be offset by lower import volumes.”

The Cedi is selling at ¢11.2 to $1 as at Saturday, October 8, 2022 in some forex bureaus.

Some forex bureau operators expressed hope the the government and the the Bank of Ghana will institute strong measures to curtail the fall of the Cedi against the major trading currencies.

The BoG earlier announced that the $1.13billion Cocoa Syndicated loan which has been signed by the Ministry of Finance and the Ghana Cocoa Board (COCOBOD) was going to help strengthen the currency.

The BoG has identified five key reasons for the woes of the local currency.

These are “The strength of the US dollar, Investor reaction to Credit Rating Downgrade, Non-Roll over of Maturing Bonds, The sharp rise in crude oil prices and impact on the Oil Bill, Loss of External Financing.”

The measures introduced to resolve these, according to the BoG, are the “Gold Purchase Program to increase foreign exchange reserves; Special Foreign Exchange Auction for the Bulk Distribution Company’s (BDCs) to help with the importation of petroleum products; Bank of Ghana is entering into a cooperation agreement with the mining companies to provide BOG with the opportunity to buy gold as when it becomes available.

“The Bank of Ghana is supporting the banking sector with foreign currency liquidity to help meet the demand for external payments. The recently approved USD750,000,000 Afriexim loan facility by Parliament, once disbursed, will boost the foreign exchange position of the country and help restore confidence.

“The Cocoa Loan is expected in the last quarter of the year. This facility will also help provide more foreign currency to help address the cedi depreciation. In the short term, we expect that when the IMF programme is finalized, it will also go a long way to help restore confidence in the economy and drive portfolio flows.”