Financial consultancy firm, Deloitte Ghana has proposed a robust and multi-pronged policy framework to lock in the recent gains of the cedi and ensure long-term currency stability after years of sharp depreciation.
In its new report titled “Unpacking the Ghana Cedi’s Resurgence,” Deloitte outlines the factors driving the recovery of the local currency including a tight monetary policy stance, improved fiscal discipline, better-than-expected export performance and renewed investor confidence under the IMF programme.
So far this year, the cedi has appreciated by approximately 44.5% against the U.S. dollar, 33% against the euro and 35.4% against the British pound, reversing its status as one of the world’s worst-performing currencies in recent years.
Other factors for this rebound include a strengthened reserves position, driven by booming gold and cocoa export earnings and the Bank of Ghana’s aggressive gold accumulation strategy plus a favourable global environment, including weaker dollar conditions and commodity price spikes.
Deloitte, however, cautions that these gains could easily unravel without sustained policy discipline.
It is therefore advising the government to maintain fiscal prudence by reducing exemptions, broadening the tax base and managing debt sustainably.
Also, Deloitte is recommending the diversification of exports and enhancement of value addition across traditional and non-traditional sectors.
“The current model of exporting some commodities in their raw state is a vicious cycle of transferring jobs and enhanced earning potential to foreign market players at the expense of Ghanaians. In this regard, we recommend that the Government invest in initiatives that add value to our primary commodity exports, such as gold, timber, cocoa, and crude oil, among others. Export diversification initiatives should also include promoting non-traditional exports like processed goods, services (tourism, IT), and manufactured items.”
Other proposals include boosting remittances and foreign direct investment through improved investor confidence and diaspora-targeted instruments, supporting import substitution and agricultural modernisation, to reduce pressure on foreign reserves and ensuring the independence and credibility of the Bank of Ghana, with transparent market interventions and sufficient buffers to cushion external shocks.
The report also suggests reforms to reduce energy sector inefficiencies and strengthen institutions tasked with economic oversight.
“Ghana, as part of its structural reforms, needs to reduce the energy sector debt burden, enhance overall efficiency in energy production and distribution, as well as work to reduce the cost of power. The Government should take a holistic view of resolving the power-related issues, as it will be key to ensure a reliable power supply, which can boost the competitiveness of local industries”, the report concluded.
