Last updateDim, 25 Jan 2015 7pm

Economy: Challenges facing economy on front pages

The challenges facing Ghana’s economy, which have necessitated stiff measures by the Bank of Ghana (BoG) to check the slide in the local currency, the Ghana Cedi, and a looming confrontation with labour unions occupied the front pages this week.

The central bank Wednesday announced wide ranging measures to control foreign exchange, by issuing strict guidelines to banks and forex bureaux on how to transact business, attracting praise and condemnation from the public, economists and politicians.

“BoG imposes new forex rules,” was the headline of the state-owned Graphic newspaper, which reported that the Bank of Ghana (BoG) on Wednesday announced additional measures to shore up the Ghana Cedi against major foreign currencies.

As part of the measures, it has banned commercial banks and other financial houses from issuing cheques and cheque books on foreign exchange accounts (FEA) and foreign currency accounts (FCA).

It has directed that no bank should grant a foreign currency-denominated loan or foreign currency-linked facility to a customer who is not a foreign exchange earner and also prohibited offshore foreign deals by resident companies, including exporters.

Over-the-counter cash withdrawals from foreign exchange and foreign currency accounts not exceeding US$10,000 shall only be permitted for travel purposes outside Ghana or its equivalent in convertible currency per person per travel.

Forex bureaux operators are not to sell or buy more than US$10,000 or its equivalent per transaction while they are required to computerise their operations by 30 April, 2014.

The state-owned Ghanaian Times had the headline “BoG bans dollar transactions”, with the story saying the Bank of Ghana has directed that all money transactions in the country should be conducted in Ghana cedis.

All banks are also directed not to grant foreign currency denomination loan or foreign currency linked facility to a customer who is not a foreign exchange earner.

The Trades Union Congress (TUC), in its reaction to the challenges in the economy, is demanding an increase in salaries, although the government has said the wage bill takes a whopping 70 per cent of the national income.

“Review salaries upwards to cushion workers – TUC” was the headline in the Graphic.

The story said the TUC was demanding significant increase in wages, as workers had been stretched to the limit.

“We cannot contain any further burden imposed on workers due to economic mismanagement,” the TUC said in a statement signed by its Secretary General, Mr Kofi Asamoah.

Reviewing the economic situation, the TUC said “the economic framework over the past 30 years had been exacerbated by pervasive corruption, cronyism, incompetence and extreme partisanship”.

“The economic indicators, as robust as we are told they are, have failed to make any significant impact in the lives of Ghanaians. Good jobs are disappearing faster than they are being created, even as the economy registers what is claimed to be ‘impressive’ growth rates,” the TUC said.

Admitting the fact that there were no easy solutions to the current situation, the union said the country needed immediate short-term remedial measures to ameliorate the plight of Ghanaians.

The Ghanaian Times, in its story under the headline “Trades Union attacks economy”, said the TUC had urged the government to roll back some of the many taxes it had imposed on the people.

Government should in addition consider introducing subsidies on utilities and fuel because the current rate of fuel prices and utilities “is neither sustainable not socially desirable for the country”.

“Financial experts praise BoG,” was the headline of another story in the Ghanaian Times on reactions to the measures announced by the central bank.

It said financial experts had described the directives by the Bank of Ghana as a step in the right direction but urged the government to do more in its monitoring and enforcement.

They said the measures taken would go a long way to arrest the depreciation of the local currency.

Mr. John Gatsi, an economist and lecturer at the University of Ghana, said government should tighten the exchange control mechanism to ensure strict adherence to the directives.

Kingsley Hayford, a financial analyst, said the move was timely but cast doubt on its enforcement and monitoring.

The Times also had the headline, “War on black marketeering”, with the story saying the Bank of Ghana would collaborate with national security to clamp down on people who buy and sell foreign currencies illegally on the black market, according to the Governor, Dr. Henry Kofi Wampah.

The move, he said, was to make foreign currencies available to the banking system to address the depreciation of the cedi.

Addressing an emergency meeting of the Monetary Policy Committee in Accra, he announced that the policy rate had been raised by 200 basis points to 18 per cent, up from 16 per cent in November, citing risk to inflation and exchange rate instability.

“Central bank, businesses in tango,” was the headline of the Graphic in reaction to the measures announced by the Bank of Ghana.

The story said BoG had justified its foreign exchange measures amid protestation from a section of business operators who say the measures would increase the cost of doing business.

The central bank defended its directives on the ban on commercial banks not to contract or guarantee offshore loans for their customers.

It also justified its decision to collaborate with the security agencies and the Attorney-General’s Department to enforce the directives.

However, mixed reactions have greeted the bank’s measures to prop up the ailing cedi.

While some local businesses have hailed the measures, others have described them as hysterical and cosmetic.

On the sidelines of a Monetary Policy Committee (MPC) news conference in Accra, the Governor, Dr. Wampah, said government agencies had also been banned from quoting and pricing items in foreign currencies.

The BoG is under further pressure to act because of inflation, which in December hit a three-year high of 13.5 per cent in a country which is viewed as one of Africa's brightest prospects because of its stable democracy and high GDP growth.

That fall in the Ghana Cedi, which has rattled consumers and shaken business confidence, is the latest problem confronting the monetary policy makers for a country that is also struggling to control broader economic instability, as depicted in its fight against a high budget deficit.

But some local business operators, especially, the Ghana Union of Traders Association (GUTA), have described the directives as discriminatory and unfortunate.

Meanwhile, Finance Minister, Seth Terkper, has said the directives are designed to help government to manage the economic volatility as a result of the falling value of the local currency.

“Ghana looks forward to exciting 2014 - President tells envoys”, was the headline of a story in the Graphic on President John Dramani Mahama’s hope for 2014.

It said President Mahama had indicated that Ghana was looking forward to an exciting 2014 in which the pace of economic development and prosperity will be quickened.

He said he had consequently invited the country's development partners to join the government in the strides at realising the dream.

President Mahama, speaking at a cocktail party he hosted for members of the Diplomatic Corps on Wednesday, said the government was working assiduously to address the economic challenges that confronted the nation to ensure better living conditions for the people adding that financial discipline would be the hallmark of the government.

Pana 09/02/2014