Vice President Paa kwasi Amissah Arthur has called for the devaluation of the cedi and other currencies in the ECOWAS zone so as to establish a common condition necessary for adopting a single currency by 2020.
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Vice Prez calls for cedi devaluation
Speaking at the 35th Meeting of the Convergence Council of the West African Monetary Zone (WAMZ), Amissah Arthur said the regional economic bloc must be “innovative and confront dogmatic thinking”.
“We need to design a stability mechanism, create a banking institution, strengthen fiscal regimes in member countries and improve information sharing and surveillance within the West Africa Monetary Zone,” he said.
Amissah Arthur said because of the centrality of exchange rates in the convergence process, its volatility and transmission role in reserve accumulation, price formation and the fiscal deficit, there is an advantage for countries to enhance currency stability by devaluing.
“Will formal and discrete devaluation rather than creeping depreciation increase currency stability and resilience, thereby boosting convergence?” Amissah Arthur asked rhetorically.
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Mixed Reaction
Managing Director of Dalex Finance, Kenneth Thompson has welcomed the vice president's call.
“We are now caught between importing everything, a steadily depreciating currency’ transfer of local jobs overseas, rising taxes to finance a fiscal’ deficit and an exploding national debt. One way to break this vicious cycle and is to devalue the currency and take short term pain for long term gain” he told the Business and Financial Times.
Emmanuel Asiedu-Mante, Former Deputy Bank of Ghana Governor also told Accra based Cit Fm that the decision to devalue the cedi should be based on economic fundamentals not for being part of a Union.
According to him, majority of companies in import business risk collapse if Ghana goes ahead to devalue the cedi.
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Cedi performance
The cedis is expected to remain volatile in the first quarter of 2016.
The Ghana cedi lost 18.75 per cent in value to the US dollar last year, making it one of the most underperforming currencies in Africa.
“Now that commodity prices are declining, technically the Central Bank must accommodate the pressure on the cedi or else we will be in trouble,”CEO of Investcorp, Sampson Akligoh told the Business Finder Newspaper.
The currency started the year at GH¢3.20 to the American currency but ended the year at about GH¢3.80, a 15.0 percent depreciation rate.
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