$3bn Eurobond not solution to cedi depreciation – Minority

THE Minority in Parliament has cautioned government not to give Ghanaians “false hopes” that the local currency would gain stability following the issuance of the US$3 billion 2019 Eurobond. 

Government on Tuesday secured the amount from international institutions at the close of a road show in London through a three-tranche Eurobond which attracted more bids than the country asked for. 

Oversubscribed by about seven times, the issuance of the bond is expected to boost confidence in the Ghanaian economy and help reverse the current depreciation of the local currency, the cedi. 

But at a media encounter dubbed ‘The impact of the currency depreciation’ on the economy under the chairmanship of the Minority Leader, Haruna Iddrisu, in Accra yesterday, the caucus said the US$3 billion at a net of US$1 billion “will only improve short term liquidity but will not address external vulnerabilities.”

According to the opposition National Democratic Congress (NDC) lawmakers, the current “worsening” economic conditions were “self-inflicted” because they stem from gross mismanagement and poor policy choices by the Akufo-Addo-led government.  

Addressed by the Ranking Member of Finance Committee, Casiel Ato Baah Forson, the Minority said “government must focus on building a strong and resilient real sector that will support the consolidation of the gains from other key sectors. The time to end the high import-dependent economy is now.”

The Ranking Member identified what he said was fiscal risks and policy inconsistencies, low market and investor confidence, loose and populist monetary policy as the cause of the free-fall of the cedi and the worst performing currency in Africa. 

Mr Forson said government had placed itself into a “tight corner; and now taking very desperate measures that would make matters even worse.”

Making reference to the Ghana Cedi Reference Rate announced by the Bank of Ghana, ostensibly to guide exchange rate determination, Mr Forson, who is also the Member of Parliament for the Ajumako/Enyan/Essiam constituency urged government to avoid such “desperate” measures.  

The free-fall of the cedi at the turn of the year, the Minority observed had impacted negatively on the economy as prices of goods and services were on the rise amidst waning confidence in the economy, thus affecting the real sector of the economy. 

In the view of the Minority, the depreciation of the cedi was expected to increase the public debt because “all fiscal and financial estimates [in the 2019 budget] were made using a projected cedi/dollar exchange of GH¢4.8 per dollar.”

He observed that per the depreciation of the cedi, Ghana’s external debt which stood at US$18 billion, which translates into GH¢86.4 billion in November 2018, now stands at GH¢101.3 billion at exchange rate of GH¢5.6 per dollar. 

The caucus accused the government of hypocrisy because it labelled borrowing as a lazy man’s approach when in opposition but was now was on a borrowing spree contrary to what they said.

Ghana’s public debt at the end of 2016, the Minority said stood at GH¢122.3 billion, a figure it said had shot up to GH¢179.9 billion in November 2018 and now GH¢201.8 billion when government bonds of GH¢13.6 billion was issued to clean the banking sector. 

The solution to this economic ‘quagmire’ the Minority said should be the “immediate presentation of a new budget which considers all the distortions and serious problems occasioned by the fall in the value of the cedi”; because “the budget presented by the Finance Minister can no longer be relied on as the true blueprint upon which the management of the economy for this year can hinge.


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