A lecturer at the University of Ghana Business School, Professor Godfred Bokpin has pointed to effective leadership and painful choices on the part of government for the current appreciation of the value of the cedi.
He said the current trend in the value of the cedi is due to effective collaboration between the Minister of Finance and the Governor of the Bank of Ghana.
“You can see leadership here from the highest level. You can see painful choices that are manifesting in what we are seeing,” Prof Bokpin said on TV3’s KeyPoints on May 24.
He was contributing to discussions on what accounts for the appreciation of the value of the cedi against major foreign currencies, especially the dollar.
While the government and its officials have attributed the gains being made by the cedi to deliberate policies, the leadership of the New Patriotic Party (NPP) are taking credit for the positive development. They contend that it is due to policies implemented during their administration as the National Democratic Congress (NDC) government has been in office for barely five months.
However, Prof Bokpin explained that the current government has implemented two main policies that have resulted in the positive performance of the cedi.
“I want to look at it from two main policies- There is s fiscal backing. If you look at what the economy has been through in the last 3 years, the excess injection of liquidity into the economy through high expenditure. We have seen this government do within five months what we have been calling for since COVID-19 (2020-2025). Since COVID, we’ve been saying that we need to cut wasteful spending, so that we choose a gradual fiscal consolidation that will be less painful, we didn’t do that,” he said.
The Professor of Finance further noted that, “to make matters worse, in 2022, the Bank of Ghana moved in strongly with excess liquidity that created inflationary pressures that pushed over 800,000 into poverty. Then in 2024, you realised that the IMF programme, we missed all the targets, with the exception of GDP growth that was higher than programmed and international reserves. When it comes to the main anchor for fiscal consolidation, we missed it.
He pointed out that, “We were supposed to do 0.5% of GDP on primary surplus, but we did a negative of more than 3%. So, they have used the 2025 budget to more or less correct some of these imbalances. to the extent that they have had to restore the IMF programme back on track by moving from a negative surplus of more that 3% of GDP to a primary balance-positive of 1.5% of GDP.
What that means is that we’ve done this but there is a tradeoff- growth projection was lower than the fiscal outturn in 2024. So, to a large extent government is not spending as we have seen in the last couple of years. In nominal terms, we shrunk expenditure by GHC10 billion compared to 2024. So, in a lay man’s terms, the economy was overheating, they had to coo it down.”
