[ 2012-08-16 ]

Re-emergence of black market is a consequence of failed policies – Bawumia
The Vice-Presidential Candidate of the New
Patriotic Party (NPP), Dr. Mahamudu Bawumia has
stated that the re-emergence of a vibrant foreign
exchange “black market,” is the consequence of
weird and counter-productive policy measures being
instituted by the current managers of the economy,
to address the free fall of the Ghanaian cedi.

Dr. Bawumia stated this at a brief media
interaction on arrival in Kumasi on Wednesday
afternoon.

The NPP running-mate said that the policies of the
Central bank which had led to the re-emergence of
the black market was a reversal of policies
undertaken by various governments in over 25 years
which saw “black market” transactions move into
the Forex Bureaus and the Banks and a build-up of
confidence in the local Ghanaian banking sector.

The former Deputy Governor of the Bank of Ghana in
assessing the situation with the Ghanaian
currency, which is at an 18 year low and is the
worst performing currency at the moment on the
African continent, said “so far the measures taken
to arrest the depreciation has generally been
counterproductive. Depreciation happens when for
example you have too much cedis for example is
chasing too few dollars; so in responding to the
situation what you do is to decrease the pressure
on the dollar and thus reduce the demand for the
dollar but what is happening in the current policy
response is very weird economic thinking”.

“What the Central Bank is doing is that they are
trying to reduce the supply of dollars in the
system as a policy response, to exchange
depreciation by virtually imposing taxes on
keeping dollars. Though they have denied it, what
cannot be denied is that as a result of the
policies of the Central Bank, it is becoming more
expensive to have dollars in your bank account” he
indicated.

Dr. Bawumia said that the situation where
Ghanaians and other nationals who had dollars in
their accounts were told that there are no dollars
when they go to their banks, is a major problem in
economic policy management as it reduces
confidence in the banking system.

“It is a contract, if I put in dollars, I expect
dollars so if I'm denied, next time I won't put my
dollars in a bank,” he reiterated.

The former Deputy Governor of the Bank of Ghana
indicated that, when banks refuse to give
customers the dollars they have deposited, it
amounts to forced conversion and a confiscation of
dollar deposits and that those incidents
inevitably undermined confidence in the banking
system.

Touching on the records of the NPP and the NDC,
Dr. Bawumia said “in the eight year administration
of the NPP during which we organized two
successful General elections and during which we
were faced with a severe global economic crisis
which saw oil for example rise to 147 dollars per
barrel, the cedi cumulatively fell by just about
50%; in eight years.

However, the NDC administration which is yet to
organize a single general election and which has
had very favourable economic conditions such as
the rise in commodity prices like Gold, Cocoa and
also with the production of oil, has supervised an
80% depreciation of the Ghanaian currency. The
difference is very clear,” he added.

The NPP running-mate noted that for him, what was
more worrying was the inability of the government
to do an appropriate diagnosis of the problem. He
said that without an adequate and appropriate
diagnosis, the policy solutions would be as well,
inconsistent and ad-hoc as was being noticed
currently.

Dr. Bawumia cited a variety of reasons for the
rapid depreciation of the cedi.

These reasons according to the renowned economist
include the Central Bank's continuous and high
financing of the government's borrowing, which he
described as hugely problematic. He said while the
West African Monetary Zone had as its criteria a
less than 10% financing of government borrowing by
Central banks, in Ghana currently, between 21 –
27% of government's borrowing is being financed by
the Bank of Ghana.

This, he said, had put unnecessary pressure on the
country's reserves and contributed significantly
to the depreciation of the cedi.

Source - MyjoyOnline

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