The Institute of Economic Affairs (IEA) has sharply criticized economic managers for their repeated failure to proactively address the cedi’s depreciation, resulting in unsustainable and reactive measures.
According to the IEA, policymakers have consistently neglected to implement necessary strategies to support the cedi. Instead, they resort to emergency interventions only when the situation becomes critical.
“The question being asked by most people is: what is the solution to the evolving cedi crisis and how do we prevent similar future episodes? To lay economists, the solution may seem monumental—or that is what our economic managers would want us to believe. However, to some of us who are lucky to be more tutored in the subject, we do not see the solution to be rocket science,” the statement read.
The IEA pointed out that policymakers typically wait until the crisis worsens before employing temporary, unsustainable measures.
For instance, the current approach relies heavily on funding from the IMF and other development partners to restore stability, which history has shown to be unsustainable.
In response to public concern, the IEA outlined practical measures to achieve lasting stability for the cedi, addressing the root causes of foreign exchange demand and supply. These measures include:
a. Acceleration of External Debt Restructuring
The government should promptly engage with the IMF and external creditors to expedite the external debt restructuring process. This would allow the IMF to release $300 million under the Economic Credit Facility programme, which, in turn, would unlock additional funds from other development partners, boosting the Bank of Ghana’s reserves and stabilizing the FX market.
b. Enforcement of FX Market Regulations
The Bank of Ghana (BoG) should enhance the enforcement of foreign exchange market regulations, including FX carry-on limits, supportive documentation for FX purchases and transfers, and prohibitions on pricing and payments in FX. These regulations would help limit FX demand and prevent speculative activities.
c. Checks on Illegal FX Dealings
The BoG’s Economic Intelligence Unit, in collaboration with security agencies, should monitor and curb illegal FX transfers and money laundering activities through banks, forex bureaux, and other channels. This would reduce the demand for FX and contribute to the cedi’s stability.
The IEA emphasized that these measures should be implemented concurrently across various phases—firefighting, short-term, medium-term, and long-term—to achieve maximum impact.