IEA Research Director criticises govt's reliance on foreign aid to bolster cedi

Ghanaian

Dr. John Kwakye, the Director of Research at the Institute of Economic Affairs (IEA), has lambasted the Akufo-Addo administration for its heavy dependence on funds from international bodies like the International Monetary Fund (IMF), World Bank, and other donor agencies to stabilise the cedi.

Describing the government's reliance on foreign aid, including Eurobonds and cocoa syndicated loans, as a "lazy

Read full articleman's approach," Dr. Kwakye voiced his concerns during an IEA press briefing on Wednesday, April 3, where he analyzed the recent Monetary Policy Committee meeting of the Bank of Ghana (BoG).

He expressed skepticism about the sustainability of this approach, warning that the pressure on the cedi would resurface when the loans need to be repaid.

“The Governor admitted that the foreign exchange market came under some pressure, both seasonal and non-seasonal-in February and early March. He reported that in the year to 20th March, 2024, the Ghana cedi recorded a depreciation of 6.8 percent against the US dollar. He, however, stated that the cedi “continues to recover its value.” But the question is by what measure?

“Certainly, not in nominal terms because since he spoke on 25th March, the cedi has continued to depreciate, reaching nearly GHS13 to the dollar. Let us repeat right here that relying on funds from the IMF, World Bank, Eurobonds, cocoa syndicated loan, etc. to bolster the cedi, as we have been doing, is not only “a lazy man’s approach,” to say the least, but also clearly unsustainable as the pressure would be back on when the loans fall due for repayment.”

He advocated for increasing forex earnings and reducing import demand as more effective strategies for stabilising the cedi in the long run.

"The way to stabilise the cedi on a durable basis is to increase our FX earnings through greater ownership of, and value addition to, our natural resources, to reduce our import demand through domestic industrialisation and to entrench fiscal and monetary discipline."