BUSINESSES IN GHANA THREATENED BY CEDI DEPRECIATION

The Ghana Union of Traders Association (GUTA) has stated that the depreciation of the cedi against other major trading currencies is alarming and the increase in the monetary policy rate is also leading to a high lending rate in the country.

With the Cedi depreciating, businesses had reached a situation where their survival is seriously threatened. In December 2021, $1 was equal to GHS 6.4 as against now that the dollar is GHS9. This means that the trading capital of Ghanaians has decreased by about 40%. GUTA is of the view that the big institutions that serve as channels for foreign products especially Chinese goods to be imported into the country are the course of the Cedi depreciation.

The Union, therefore, urged the government to reconvene the Foreign Exchange Committee that was by the Finance Ministry which involved all relevant stakeholders, to brainstorm and find an immediate solution to this canker.

Why The Cedi Is Depreciating

One of the main reasons for the depreciation of the cedi is the high demand for foreign currencies. This is due to Ghana’s imports exceeding its exports, which creates a trade deficit. Huge sums of money are being taken out of the country to import goods whiles little money comes into the country as a way of export.

Another reason is the low reserves of foreign currency held by the Bank of Ghana. This decreases the ability of the central bank to intervene in the market and support the cedi.

The government’s fiscal deficit is also putting pressure on the cedi. This is because when the government spends more than it earns, it has to finance this deficit by borrowing money, which increases demand for foreign currency and puts downward pressure on the cedi.

The cedi has been on a steady decline for some time now and businesses are feeling the pinch. The cost of imports is rising, while the prices of exports are falling. This is leading to a situation where businesses are struggling to survive. The government has responded by increasing the monetary policy rate, which has only served to further increase the lending rate and make it even more difficult for businesses to operate. It is clear that something needs to be done to address this issue, or else many businesses will be forced to close their doors.

Effect Of The Depreciation On Businesses

The depreciation of the cedi has had a negative effect on businesses in Ghana. Many businesses have been forced to close their doors due to the increase in the cost of goods and services. The cedi has lost value against major currencies, making it difficult for businesses to purchase imported goods and materials. The monetary policy rate has also increased, leading to higher lending rates and further financial strain on businesses.

Businesses are forced to lay off workers because of the depreciation nature of the Cedi. Some are forced out of business because they use huge sums of money to exchange for fewer dollars so their purchasing power abroad has reduced drastically. This goes a long way to affect their profit margin hence they have to lay off workers to maximize their profits.

Government Should Act Fast

The situation has reached a point where the survival of many businesses is seriously threatened. The government must take action to stabilize the cedi and help businesses survive this difficult period. If not, more businesses will be forced to close their doors and unemployment will increase drastically.

GUTA is calling on the government to intervene and save businesses from collapse. They also want the government to reduce taxes on imported goods to help ease the burden on businesses. Various stakeholders should collaborate to help towards mitigating the impact of cedi depreciation. We need to take measures now before we see increased poverty and inequality because of our lack of preparedness.