A Professor with the University of Ghana (UG), Lord Mensah, has shed light on the actual value of the dollar in relation to the Ghanaian Cedi.
According to Prof. Mensah, the real value of the dollar is higher than what is currently reflected in the market.
In a post on the X platform, he indicated that while the market shows that 1 dollar is worth about fifteen Ghana Cedis, forty-three pesewas (GHC 15.43), he added that the actual value should be closer to twenty Ghana Cedis (GHC 20.00).
The true level of the Cedi pic.twitter.com/ovcUoJe3Db
— The Prof (@stigue2001) July 18, 2024
Prof. Mensah explained that the lower market price is due to temporary government measures aimed at stabilizing the cedi.
These measures include rearranging debt, pausing debt payments, and reducing imports by making them more expensive.
These strategies, he stated, are designed to prevent the cedi from dropping too quickly.
However, he pointed out that these temporary fixes are not addressing the underlying issues.
He attributed these to Ghana’s inability to produce and exporting enough goods to strengthen its currency in the long term.
“The true level of the Ghana Cedi to the Dollar simplified. The shadow (economic) price of the dollar is about GHS 20. The GHS 15.43 on the screen is just the market price. Simple economic relationship to justify this: Economic price= Market Price+ Fiscal Adjustments
The fiscal adjustments can be debt restructuring, external debt suspension, or reduction in importation as a result of high tariffs. Open up all these adjustments, and you will see the true level of the Cedi.
“Usually the fiscal adjustments are temporal measures to suppress or fixed the free fall of the currency, which is good. Unfortunately, our fiscal adjustments are not yielding the necessary production (exports) to control the local currency.
This is not speculation; it is a fact, simple,” he wrote.
As a result, while the market price of the dollar appears more favorable, the true economic value is higher because the fundamental economic issues remain unresolved.
The renowned Financial Economist and Executive Director of the Centre for Economics and Finance emphasised that without addressing these core problems, the Ghanaian Cedi will continue to face pressure, and the true value of the dollar will remain higher than the market price suggests.