Faced with possible extinction as a result of the alarming rate of the depreciation of the cedi, which is wiping out their capital so fast, the business community is demanding immediate drastic measures to halt the continuous fall of the cedi.
The cedi, which traded at GH¢3.2 to US$1 at the end of December 2014, is now trading at GH¢4.4 to US$1 at the forex bureau.
Analysts blame the slide in the value of the cedi to the high fiscal deficit arising from unproductive spending, tracing it directly to the high fiscal deficit which peaked at about 12% of Gross Domestic Product (GDP) in 2012.
Speaking to The Finder, the Joint Private Sector Business Consultative Forum said if the fast pace of depreciation of the cedi should continue to the end of the year, most businesses would lose their entire capital and fold up.
For example, Executive Secretary of the Importers and Exporters Association of Ghana, Samson Asaki called for the resignation of Finance Minister Seth Terkper and Bank of Ghana Governor Dr. Henry Kofi Wampah if the two cannot immediately stop the depreciation of the cedi.
He went to the extent of appealing to President John Dramani Mahama to dismiss Mr. Terkper and Dr. Wampah if they fail to bow out voluntarily.
The Joint Private Sector Business Consultative Forum is made up of the Ghana Chamber of Commerce and Industry (GCCI), Ghana Automobile Dealers Association (GADA), Food and Beverages Association of Ghana (FABAG), and the Ghana Union of Traders Association (GUTA).
It also includes the Importers and Exporters Association, Ghana Pharmaceutical Chamber, Association of Ghana Industries (AGI), Customs Brokers Association of Ghana, and Freight Forwarders Association of Ghana.
Speaking to The Finder, General Secretary of GUTA, Mr. Altah Shaban said about 70% of members of the Joint Private Sector Business Consultative Forum, especially those in the informal sector, risk folding up possibly by the end of the year due to the negative impact the depreciation of the cedi has on their businesses.
He noted that the cedi, which traded at GH¢3.2 to US$1 at the end of December 2014, is now trading at GH¢4.4 to US$1 at the forex bureau, representing over a 100% slide.
According to him, at January 2014, businesses exchanged GH¢100,000 for $50,000; today, the same GH¢100,000 can only be exchanged for less than $25,000.
Mr. Shaban said, following this unfortunate development, traders and various business professionals were putting pressure on the Joint Private Sector Business Consultative Forum to develop a pricing formula that all businesses can use to determine the prices of their goods to reflect the rate of depreciation, as is done by National Petroleum Authority (NPA) to determine prices of petroleum products; the Ghana Ports and Harbours Authority (GPHA) indexing import duties to the dollar; and the Ghana Private Road Transport Union (GPRTU) determining transport fares.
He explained that the position of those making these calls is that once other institutions were using a pricing formula that takes into consideration cedi depreciation to determine the prices of their goods, it would not be out of place for the Joint Private Sector Business Consultative Forum to also adopt a similar formula.
The General Secretary of GUTA said increasing prices to reflect the rate of depreciation at this moment was a huge risk because it would make prices of goods very expensive and dampen demand, which is already at record low.
Mr. Shaban disclosed to The Finder that inundated with pressure, the Joint Private Sector Business Consultative Forum, including GUTA, met last Thursday, June 18, 2015 to deliberate on the matter, and at the end advised members to do their calculations to arrive at the right price to sell their goods to avoid losing their remaining capital and run out of business.
He stated that the forum also called on government to convene an emergency meeting of all stakeholders to deliberate on how to find lasting solutions to the continuous fall of the cedi.
“The business community is wondering if Ghana is on the verge of an economic meltdown like what happened in Greece and other countries,” he said.
He noted that for the business community, if the current economic crisis is the result of the implementation of the three-year International Monetary Fund (IMF) bailout programme, then government should immediately opt out of it.
Mr. Shaban disclosed that the forum wants government to engage all relevant stakeholders to deliberate on the way forward for the country.
He announced that the Joint Private Sector Business Consultative Forum would meet again next Tuesday, June 30, 2015 and all leaders of member associations that form the forum and GUTA would attend to deliberate on the issue.
Meanwhile, Secretary of Importers and Exporters Association of Ghana, Samson Asaki pointed out that at the time both Mr. Terkper and Dr Wampah assumed office, the cedi traded at GH¢2.2 to US$1.
He noted that now that US$1 is trading at GH¢4.4, it points to the inability of the BoG and the Finance Ministry to halt the cedi’s fall, as well as hold inflation and lending rates in check.
Analysts on cedi’s fall
Analysts blame the slide in the value of the cedi to the high fiscal deficit arising from unproductive spending, tracing it directly to the high fiscal deficit which peaked at about 12% of Gross Domestic Product (GDP) in 2012.
The ‘dollarisation’ of local transactions, including government’s own policy of indexing import duties to the dollar, also tends to put pressure on demand for dollars by economic agents to avoid potential losses for holding domestic currency to pay import duties at the port.
According to the analysts, the BoG is limited in its ability to always intervene in the market to halt the levels of depreciation.
BoG cannot intervene to correct the market if the currency depreciation is caused by the huge fiscal deficit or as a result of debt repayment or repatriation of profits.
The IMF programme was expected to provide the technical and balance of payment support to sustain investor confidence in the cedi.
Even though the programme has commenced and Ghana has received $114.8m, the cedi continues to slide at a faster pace.
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