It’ll hurt exports if Cedi hits 4 against the Dollar – Mahama

President John Dramani Mahama says that it would hurt Ghana’s experts if the Cedi hits 4 Cedis against the Dollar.

He states that the true value of the Cedi is estimated to be between 10 and 12.

“Letting the Cedi reach 4 to the dollar would hurt exports. Its true value is estimated between 10 and 12, a range that supports both importers and exporters,” President Mahama said at the seat of government, Jubilee House in Accra on Tuesday, June 3, when the federation of exporters paid a courtesy call on him.

Meanwhile, prices on the market have started dropping to reflect the stability of the Cedi.

This is according to the Ghana Union of Traders Association (GUTA).

Charles Kusi Appiah Kubi, head of the Economic and Business Bureau at GUTA, mentioned that 50 KG of rice, previously selling at about 950, is now selling at 750 Cedis.

That is 200 Cedis down, he said.

Speaking on the Business Focus on TV3 on Monday, June 2, Kusi Appiah Kubi stated that GUTA has done their arithmetic and has come to the conclusion that at this point, it is good to extend some gains to consumers.

He said, “So, even within the food commodities, we see a drop in prices. We said that for a drastic reduction in prices, we need two months to do that, but even within that time, prices are dropping. 50 KG of rice, previously selling at about 950, is now selling at 750 Cedis. That is 200 cedis down. You take general oil, GHS 780; some are now selling at 650 Cedis.”

He, however, stated that the exchange rate is not the only determining factor in price buildup.

He said the cost of borrowing, the cost of fuel, consumer taxes, and the cost of procurement and replacement are some of the factors that go into price determination.

“The point is this: we understand the dynamics within the market, and as an integral part in terms of economic revamp, we have a responsibility; one of them is to ensure that we safeguard our gains, that we don’t just jump on the bandwagon and lose out. That was why we said, ‘Give us some months so that we can better have predictions of what is going to happen tomorrow.

“When forex goes up high, it affects us directly. Forex has been the weakest link in terms of capital gains. Any time there is a drop in forex, it has a direct effect on us, but that is also to say that forex is not the only determinant in our price build-up.

“There are a lot of factors that we look at too, such as fuel, cost of borrowing, and consumption tax, which also add up to price build-up. We also look at the cost of procurement and the cost of replacement, and then we come up with the prices that will commiserate with the forces on the market. So we have done this arithmetic, and we have concluded that at this point, it is good to extend some gains to our consumers; that is why you see prices dropping.”

Recently, the Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, also explained why Ghanaians may not be experiencing price reductions on the market the way they earlier anticipated, despite the appreciation of the Cedi.

He explained that people stock their goods at a higher exchange rate, and so naturally, even with the appreciation of the Cedi, it takes a while for consumers to see that adjustment.

Dr Asiama, however, assured Ghanaians and the general public that they would soon see adjustments in the prices of goods and services so long as there is competition.

This follows the appreciation of the Cedi against the Dollar.

Asked when Ghanaians are to expect price predictions on the market following the stability of the local currency, Dr Asiama answered during the 124th Monetary Policy Committee (MPC) press conference in Accra on Friday, May 24, “You can understand that some people stock their goods at a higher exchange rate, and so naturally, even with the appreciation, it takes a while for you to see that adjustment.

“However, rest assured that you will see the adjustment certainly so long as there is competition, so long as it is not a monopoly, and we will see that kind of phenomenon very soon.”
Asked again whether the appreciation is sustainable, he answered, “The Cedi appreciation has to be put into proper context. Much as you want to have Cedi stability in nominal terms, the important thing here is to ensure that in real terms, the Cedi is not appreciating persistently.

 

“And so the MPC went into a lot of deliberations, looked at the real movement of the exchange rate, and we think that where we are now, we don’t have that problem of real appreciation that would adversely impact our competitiveness.

“So, for now, we think that the trend is in line; we are observing it continuously, though. However, the appreciation is largely driven by the markets; it is not something that the central bank is using its reserves for.

“If you look at the data pack we have put out, you can see that our reserve program is growing, so we are not using our reserves to intervene in the market; therefore, the appreciation you are seeing is driven by the economic policy stance of the monetary policy and by international flows. So yes, it is appreciation; however, for us, it is about maintaining exchange rate stability