Accra, Ghana - As the year-old government of President John Dramani Mahama battles to save the ailing Ghanaian economy, he is rallying support for measures that his economic management team believes would improve conditions.
“These are difficult decisions to take, but they will protect the integrity of the economy and show good results down the line,” the local media Thursday quoted President Mahama as telling senior journalists in Accra, the nation's capital.
He is also quoted as saying the measures announced a week ago by the central bank, especially to arrest the slide in the local currency, the cedi, were 'a bitter pill that must be swallowed and which would eventually inure to the benefit of the economy as a whole.'
The general chorus is that 'times are hard', and it is not hard to find the evidence. Inflation for January 2014 is at a three-year high at 13.8%; there is pressure by labour for more salary, although the Ministry of Finance says public sector pay gobbles some 70% of revenue; withdrawal of subsidies on petroleum products and utilities has led to increases in fuel prices as well as electricity and water, increase in taxes; while the high exchange rate has seen prices of goods and services rise.
Ghana may not be alone in the current difficulties. Several economies in developing countries have been under pressure of late, with the Turkish lira, for example, sliding by 7.2% per cent against the dollar this year, 10.4% in the case of the Argentine peso and 4.7% for the South African rand, among others.
The Ghana cedi slumped by about 18 per cent last year and the slide has continued this year, with the currency now pegged at about 2.4 to the US dollar, despite heavy interventions by the central bank and last week's measures announced by the central bank.
As the cedi continues to slump, the central bank has announced stiff measures to tighten operations of forex bureaux and revise the mode of operation of foreign exchange accounts and repatriation of foreign earnings by exporters.
Under the measures, no cheques or cheque books shall be issued for foreign currency while cash withdrawals over the counter from foreign currency accounts shall only be permitted for travel purposes outside Ghana and shall not exceed US$10,000.00 or its equivalent in convertible foreign currency, per person, per travel.
As expected, these measures by the Bank of Ghana (BoG) have been sharply criticised, with foreign account holders threatening to take the central bank to court to reverse the decision while others have said bluntly that the measures would fail.
Some economists say these measures must be backed by government's control of its expenditure to make them succeed.
That appears a tall order, as the electorate demand fulfillment of electoral promises in the December 2012 elections that saw Mahama, then vice president, emerge victorious against all odds, as he had only a few months to campaign after the sudden death of President John Evans Atta Mills in July 2012.
There is also the need to curb the insatiable demand of Ghanaians for foreign currency and foreign goods.
President Mahama is calling on his compatriots, especially the business community, to have confidence in the Ghana cedi since that is the only way to protect it against depreciation.
He told journalists that the clamour for foreign currencies, particularly the dollar and the pound sterling, for domestic financial transactions, would not help in enhancing the integrity and stability of the economy.
PANA reports that Indeed, rent, school fees, hotel bills, prices of items in some shops and other goods and services are quoted in US dollars.
“If all of us don’t have faith in the cedi when is the cedi going to be strong?” the President asked.
According to the state-owned Graphic, President Mahama has noted that about US$1 billion was spent on the importation of seven items per annum, although these could be sourced or produced locally.
They include rice, vegetable oil, sugar and frozen foods, whose import amounted to about half of the foreign exchange the country earned from its chief export, cocoa.
As he continues to be pummelled by the opposition and Trades Union Congress for 'poor management' of the economy, the President is asking Ghanaians and the business community in particularly to cooperate in the implementation of measures to reduce the stability of the local currency and the overall confidence in the economy.
Business operators needed to consider the implementation of recent measures by the Bank of Ghana to halt the dollarization of the economy, as a joint responsibility in protecting the local currency, he said.
Meanwhile, the government is pursuing interventions to reduce the nation’s dependence on foreign currencies, including the introduction of incentives to increase local production of commodities so as to cut the high rate of import of commodities that could be produced locally.
The Attorney-General is also working on the review of the stability agreement between the government and oil producing companies, while the Procurement Law would be reviewed to require companies to justify the importation of items for public projects for which substitutes were available locally.
“The fundamentals must change,” according to President Mahama, who adds that the over-dependence on imported items was not the best.
Analysts say while that is a truism, recovery may probably be long.