ACCRA, May 28 (Xinhua) -- The continuous weakening of the local currency has put enormous pressure on businesses in Ghana, a trade association leader has said.
Joseph Obeng, president of the Ghana Union of Traders Associations (GUTA), representing small and large-scale importers, wholesale operators and retailers across the country, told Xinhua in a recent interview that the situation has caused traders to lose capital.
According to Ghana's central bank, the Ghanaian cedi has depreciated about 14.6 percent since the beginning of this year, with one U.S. dollar currently being exchanged for about 14 cedis.
"The depreciation is taking a chunk of our resources away. For now, most businesses have suffered a loss of about 23 percent, which doesn't augur well for the economy, so the earlier we do something about it, the better," Obeng said.
He said the depreciation has caused wholesale prices of imported goods to surge. "But businesses cannot always pass on the higher prices to final consumers because high inflation has already eroded the purchasing power of the average consumer."
He partly attributed the forex crisis to speculation, with people who have no business in importation also buying U.S. dollars as a store of value. "Moreover, our investment laws allow foreign investors doing business in Ghana to repatriate profits. Many of these foreign companies own the juiciest parts of the economy but repatriate their profits around this time, leading to high foreign exchange demand," he noted.
Obeng said that despite Ghana's attraction as an investment destination in Africa, the situation has deteriorated due to the impact of the COVID-19 pandemic. He noted that the crisis is also partly due to structural weaknesses: low manufacturing capacity in the country and the exportation of natural resources in their raw state in an import-dependent economy leads to constant high demand for foreign exchange to service supplier credits offshore.
He urged the government to take steps to address the depreciation of the cedi to reinject confidence in the economy in the short term while developing long-term solutions to deal with the structural deficiencies in the economy permanently.
Samuel Bediako-Asante, chief executive officer of Sambed Financial Services, a local business consultancy, told Xinhua that with the low productive capacity and high import culture, the country's balance of payments will always be in distress. The analyst said the fluctuation in the foreign exchange market creates uncertainties for businesses, making it difficult for them to plan on a medium- to long-term basis for their operations.
The situation also has dire consequences for foreign investors and foreign traders operating in Ghana, as it can cause losses if they do not increase their prices, he added.
"If you imported your goods during Christmas when the exchange rate was relatively stable but have to pay your suppliers now, then you need more local currency to meet the real value of your goods in the foreign currency," the analyst explained.
Bank of Ghana Governor Ernest Addison, at a press briefing on Monday, attributed the currency depreciation to higher imports, central government operations and speculation. However, Addison assured businesses of enough foreign exchange reserves at the central bank to meet their demands, with a buildup of more reserves since the country commenced the implementation of reforms last May.
"The Bank has enough foreign exchange reserves to support the market, and economic agents should stop engaging in speculative purchases as they will suffer economic losses when the correction occurs," Addison said. ■
