Prioritise spending to boost cedi’s value
A seasoned banker and economist, Mr Alhassan Andani, has prescribed permanent interventions such as improvements and expansion of infrastructure and exports that generate forex to address the perennial shortage of foreign exchange and the falling value of the cedi.
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“What we have to tackle as a country are the sources of foreign exchange. For me, I will spend the money where I will get lot more returns,” Mr Andani, who is also the Managing Director of Stanbic Bank Ghana said.
Diversify sources of foreign exchange
Sharing his views on Stanbic Bank’s outlook for the year and some national economic issues, the outspoken managing director said halting the continuous decline in the value of the cedi should be premised on prioritised spending; not in favour of consumption, but towards painstakingly diversifying the economy to generate foreign exchange in future.
“We should increase the productive capacity within the economy and spend in areas where there is additional factor of increase in revenue and foreign exchange flow,” he said.
Last year, the cedi shed an average of 17 per cent of its value. The cedi has already depreciated by more than three per cent against the dollar in January alone.
The average interbank rate traded at GH¢2.2382 against the dollar on January 6 and started the January 27 week at GH¢2.3240 to a dollar. It traded at GH¢2.50 to the dollar on January 31 at GH¢2.50 to the dollar.
Priority areas
Explaining further, Mr Andani said Ghana had a unique opportunity for being the warehouse of West Africa by increasing the efficiency of handling and storage at the Tema and Takoradi ports to serve as a huge source of foreign exchange for Ghana.
“Literally every foreign airline wants space in Ghana; what are we doing with the airport, an area you can spend and get the money back,” he quizzed.
The Ghana Ports and Harbours Authority (GPHA) and the Ghana Airports Company have both announced expansions and improvements in their facilities. While the GPHA intends to make about US$2 billion investments to expand birthing and storage, the GAC is making investments to upgrade parking area for aircraft as well as expand and improve boarding gates.
However, while the port expansion project is currently on paper except the phase one expansion works at the Takoradi Port, the first since it was built in the 1920s, with 197 million euros commercial loan and the yet-to-be disbursed US$176 million loan from China Development Bank, the project at the Kotoka International Airport is progressing rather slowly.
There are other sub-sectors of the economy which are lagging that the banker and economist wants revamped to enable them contribute their quota to the generation of not only foreign exchange, but jobs as well.
The volatile nature of the prices of commodities that Ghana exports, such as gold and cocoa have not helped matters in the last couple of years. However, Mr Andani believes the productivity could be scaled up to make for any shortfalls in value.
For the first eight months of last year, the value of merchandise exports were estimated at US$9.8 billion, as against the estimated US$11.6 billion imports for the same period. Within that period, earnings from some of the country’s export commodities fell due to declining global prices.
The earnings from gold fell to US$3.4 billion on account of 12.6 per cent decline in prices, while exports of cocoa beans also declined by 21.4 per cent to US$1.4 billion.
While it is also possible to ramp up oil production, non-performing horticultural products are not growing in the quantum they should, Mr Andani suggested.
Outlook
Stanbic Bank’s analyses indicate that recent price adjustments in utilities and withdrawal of subsidies on petroleum products could take the entire first quarter of the year to permeate the pricing system before a real picture emerges.
“We think for first quarter, most of the government initiatives will be sinking in. Withdrawal of subsidies and increases in utility and petroleum prices would take the first quarter to pass through. These have already started influencing inflation and that would have implications for interest rates,” he explained.
The bank is, however, expecting a generally stable to a downward trending interest rate regime, saying “we have a moderate to a declining view of interest rates in 2014.”