'The fundamentals haven’t changed' - Prof. Baah Boateng cautions against cedi hype

An Economics lecturer at the University of Ghana has issued a warning. He says the recent appreciation of the cedi should be viewed with caution. The underlying fundamentals of the economy have not changed.

Professor William Baah Boateng spoke on Joy News’ PM Express Business Edition. He cautioned against being overly optimistic about the strengthening currency. The structure of the economy remains unchanged from last year.

He noted that there are some positive fiscal developments. The government is managing its expenditure more effectively. This is an important factor to consider.

However, he clarified that this does not mean aggressive cost-cutting is happening. “Government is not cutting expenditure,” he stated. It’s crucial to differentiate between cutting and managing expenditure.

The government aims to ensure that its spending aligns with economic activity. This approach helps ease pressure on fiscal matters.

Prof. Baah Boateng explained that improved fiscal discipline benefits monetary policy as well. If fiscal management improves, it reduces issues for the central bank. This allows the central bank to focus on monetary and exchange rate policies.

He also addressed comments from business leaders in GUTA celebrating the cedi's strength. He disagreed with their predictions of further gains for the dollar.

“I’ll be happy if prices drop when the dollar falls,” he said. However, if price reductions do not occur, caution is necessary.

Prof. Baah Boateng criticized traders who raise prices when the cedi weakens but don’t lower them when it strengthens. “If the cedi appreciates, they should reduce prices,” he insisted.

He called for importers to show similar behavior in reverse during currency fluctuations.

Regarding the Bank of Ghana, he praised its calm approach during this period. “The central bank is watching and not just reacting,” he noted.

He emphasized that no economy relies solely on demand and supply without regulation. The Bank of Ghana’s cautious posture is prudent in this context.

Finally, Prof. Baah Boateng stressed that while signs of recovery exist, structural reforms are essential for lasting change. Responsible fiscal management is needed beyond short-term currency appreciation.