World
President to address currency crisis in Ghana
Publish Date: Feb 25, 2014
President to address currency crisis in Ghana
Ghana President, John Dramani MahamaPHOTO/AFP
  • mail
  • img
newvision

ACCRA - The president of resource-rich Ghana, seen as a beacon of democracy in a turbulent region, was to unveil economic reforms Tuesday, as a free-falling currency sparks frustration over living costs.

John Dramani Mahama was to address the crisis in the once-buoyant west African economy in a state of the union speech from 1030 GMT as a plunging cedi boosts the price of everything from eggs to fuel.

Ghana's economy, backed by gold, cocoa and oil exports, has soared in recent years but the cedi currency has lost nearly a quarter of its value since last year.

Analysts put the drop down to high deficits, a 28-percent decline in the gold price and the withdrawal of stimulus measures by the US Federal Reserve that has hit emerging market currencies worldwide.

And as the crisis hits the people on the street, experts warned that Mahama's reforms must tackle structural issues such as ballooning deficits if the country is to deliver on its promise as the star of West Africa.

Razia Khan, head of Africa research at Standard Chartered Bank, said Ghana faces "a deeper underlying problem with fiscal management and that is the extent of the fiscal deficit."

Debt levels may soar to such unsustainable levels that Accra may have to cut back on other spending "that has a meaningful impact of growth," she warned.

Like many African countries, Ghana struggles with a bloated and inefficient public sector and the government has to shell out nearly 12 percent of total economic output -- 75 percent of all oil revenue -- on the wage bill.

And the currency crisis sparked a dramatic shortage in dollars, prompting the central bank to tighten outflows of foreign exchange and to insist local business be conducted in cedi -- a measure Khan dismissed as a "short-term fix."

Nevertheless, there are some bright spots on the horizon. Ghana has a young population and is eyeing a ramping-up of oil production above the current 100,000 barrel per day output once infrastructure improvements are made.

Many analysts forecast annual growth above six percent over the next decade, despite the structural flaws in the economy.


The Ghanaian Cedi (Photo credit: Issouf Sanogo/AFP/Getty Images)

Belt tightening

The crisis in the currency is already having an impact on consumer behaviour as prices soar, Accra shopkeeper Eva Botchway told AFP.

"When someone comes here and wants to buy something ... because of the increase (in prices), he or she cannot," she explained.

The falling cedi and rising fuel price has also hit lowly paid transport workers, said Benjamin Armah, who collects money for a union of drivers who ferry passengers from Accra's suburbs to the centre on dilapidated buses.

Bus companies have been forced to hike ticket prices to combat the rise in the petrol price, he said.

"People used to travel from outside to Accra to come and do business. But now the fuel price is high," he added, sitting next to a line of half-empty buses waiting for passengers.

"We are praying that the fuel price on the world market goes down."

AFP

The statements, comments, or opinions expressed through the use of New Vision Online are those of their respective authors, who are solely responsible for them, and do not necessarily represent the views held by the staff and management of New Vision Online.

New Vision Online reserves the right to moderate, publish or delete a post without warning or consultation with the author.Find out why we moderate comments. For any questions please contact digital@newvision.co.ug

  • mail
  • img
blog comments powered by Disqus
Also In This Section
Nuns go public for first time in 150 years
A group of Ecuadoran nuns opened the doors of their convent to the outside world Saturday - a first since the order arrived in the South American country 150 years ago....
Obama’s cool-in-a-crisis style – asset or liability?
Obama''s cool-in-a-crisis style and disdain for the impulsive use of military force is fueling criticism of his leadership....
Ukraine rebels prepare attack as EU warns Russia of new sanctions
Pro-Russian separatists were preparing a fresh offensive on a key coastal location in eastern Ukraine on Sunday, as EU leaders gave Moscow one week to curb its support for the rebels or face new sanctions....
EU readies new Russia sanctions as Ukraine conflict spirals
The European Union geared up a fresh wave of sanctions against Russia on Saturday with warnings that the escalating conflict in Ukraine was putting all of Europe at risk of war....
Deadly Ebola hits 5th West African nation
The deadly Ebola epidemic has spread to a fifth country in West Africa with the first confirmed case of the deadly virus in Senegal....
UN chief slams
UN Secretary General Ban Ki-moon has slammed "brutal killings of civilians" by Islamic State jihadists in northern Iraq, saying the Sunni radical group was tearing apart whole communities....
Do you think banning the sale of single cigarette sticks will help regulate tobacco production?
yes
No
Can't Say
follow us
subscribe to our news letter