Dr. Mahamudu Bawumia has
revealed that the Bank of Ghana,
under the National Democratic
Congress government, has spent a
whopping $6.5 billion from 2009 to
date, in their failed attempt to
stabilize the value of the Ghana
cedi. Notwithstanding this large
expenditure of scarce foreign
exchange reserves, Ghana's
currency is now officially, the worst
performing currency in the world.
According to Dr. Bawumia, in 8
years of the administration of
President John Agyekum Kufuor,
the Bank of Ghana spent some $2.5
billion in non-oil foreign exchange
sales to stabilize the cedi. At the
time the NPP left office in January
7, 2009, the cedi traded at GH¢1.2
to $1. However, despite the $6.5
billion spent by the Bank of Ghana
to intervene on the foreign
exchange market, the Ghana cedi,
according to Dr. Bawumia is
currently trading at almost GH¢4 to
$1. Dr. Bawumia noted that this
indicates that the fundamentals
underlying the Ghanaian economy
are seriously out of gear. Dr.
Bawumia also pointed out the fact
that by the end of 2014 the cedi
would have depreciated by more in
one year than in the entire period
of the NPP administration between
2001-2008.
.The running mate to Nana Akufo-
Addo in the 2008 and 2012
elections also revealed that
Ghana's net international foreign
exchange reserves, which currently
stands at some $700 million, can
now only account for less than one
week of import cover, a very
precarious situation.
"The bills that we owe as a nation
is currently more than what we
have in our reserves, and yet still
the government says we are not in
a crisis?" Dr Bawumia asked.
In view of this serious situation, Dr.
Bawumia stressed that Ghana will
soon have no option than to opt for
a bailout from the International
Monetary Fund, as opposed to
claims being made by government
that it is not considering a loan
from the IMF.
Dr. Bawumia indicated that the
admission made by Finance
Minister, Mr. Seth Terkper, on July
17 that "paying statutory funds will
cripple the economy" means the
economy is already crippled and on
the verge of bankruptcy.
"When schemes like GYEEDA,
SUBAH, SADA crop up, the NDC will
always find money for it. However,
when statutory payments to the
NHIS, District Assemblies Common
Fund, GETFund are to be made, the
government will say there is no
money," Dr. Bawumia noted. He
continued, "When they say there is
no money, they will tell you some
dwarves came in and stole money.
If it is not high rise buildings, it is
speculators. If it is not speculators,
they will tell you it is the
redenomination of the cedi in 2007
that is the cause of the current
crisis. They really do not have a
clue”
Ghanaians and the international
community, Dr. Bawumia noted,
have lost confidence in the
Ghanaian economy, and contrary to
recent expressions of confidence in
the economy by Government
officials, Dr. Bawumia argued that
"You cannot manufacture
confidence. Confidence has to be
based on prudent, sound and
credible policies. You cannot just
wake up and try to convince people
to have confidence in an economy.
Unfortunately there is no basis for
this contrived confidence. If you
are going to solve a problem, the
first thing to do is to admit the
problem. The NDC have refused to
acknowledge that the economy is
in crisis, how can the problem be
solved if expectations are not
properly aligned?" Dr Bawumia
asked.
On the decision to go for a 3rd
Eurobond issue, which is expected
to raise $1.5 billion to be used to
fund government’s capital
expenditure in the 2014 Budget as
well us shore up depleted foreign
exchange reserves, Dr. Bawumia's
prognosis was simple.
"You cannot borrow yourself out of
bankruptcy," he said. With Ghana’s
debt levels at almost 60% of GDP
and interest payments in 2014
amounting to more than four times
Ghana’s oil revenue for the year, it
is not clear how adding to the debt
burden is going to get us out of the
current crisis. While the Eurobond
borrowing would provide additional
borrowed foreign exchange to
support the cedi, the impact is
bound to be temporary if the
fundamentals are not addressed.
Note that the Bank of Ghana has
already spent some $6.5 billion of
foreign exchange reserves in the
last six years to no avail. So what
difference will an additional $1.5
make if the underlying policies are
wrong?” he asked.
Dr. Bawumia made these comments
when he addressed delegates from
the Upper West Region during the
tour of the region, Friday evening,
by Nana Addo Dankwa Akufo-Addo.
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