Home Business We’ve reduced Cedi depreciation rate by 50% – Bawumia

We’ve reduced Cedi depreciation rate by 50% – Bawumia

The Vice President, Dr. Mahamudu Bawumia says the Akufo-Addo government has reduced the depreciation rate of the cedi by 50 percent since 2017.

According to him, Ghana runs a flexible exchange rate which allows the market forces to determine the rate of exchange leading to the depreciation of the currency.

He, however, said, inasmuch as it is so, government has ensured a low inflation rate thereby impacting the strength of the cedi positively.

The Vice President further insisted that the cedi has performed better under the Akufo-Addo administration compared with the erstwhile Mahama administration.

“Ghana runs a flexible exchange rate regime and not a fixed exchange rate regime. So the exchange rate will be dependent on the market forces but fundamentally the exchange rate will be determined by the inflation rate, [with] all other things being equal. So if you have high inflation, you will have higher depreciation. If you have lower inflation, you will get a lower depreciation. So that is the fundamental rule. We didn’t say we were going to lock the exchange rate at one rate but essentially lock it within the range of fundamentals such that the lower inflation rate will produce a lower depreciation rate [of the cedi]. Before we assumed office in 2017, the cedi was depreciating at 18 percent annually on average. But during our tenure from 2017 to 2019 it was 8.7 percent on average. So it is 18 percent versus 8 percent. So we have reduced by 50 percent the rate of depreciation of the currency.”

Dr. Bawumia further added that the NDC failed to continue the good fundamentals the Kufuor-led administration left behind thereby quadrupling the depreciating rate of the cedi in its 8-year rule.

“The way the currency was going under the NDC administration, the currency was 1 Ghana Cedi to 1 dollar almost at that time [2009] but they left office with 4 Ghana Cedis to 1 dollar. So it was a quadrupling of the nominal rates of the Cedi and if it had followed on that trajectory, it would have been 16 Ghana Cedis to 1 dollar.”

He made this known in an interview on Peace FM on Tuesday, August 25, 2020.Currently, the Ghana Cedis is trading at 5.7 Ghana cedis to the US dollar.