Cedi depreciation caused by ‘blows in parliament’, negative ratings-Veep
The Vice President, Dr. Mahamudu Bawumia, has blamed the depreciation of the Ghana cedi largely on negative credit ratings, challenges in getting the 2022 budget passed, and the refusal of investors to roll over their monies in Ghana’s economy among others.
He was addressing TESCON, a tertiary based group of the rikubg NPP in Kaspa on Friday, April 7, 2022.
He also stated that fuel prices on the international market, as well as the Russia-Ukraine war, have also contributed to the cedi depreciation.
“The financial markets’ assessments of the 2022 budget, unfortunately, concluded that our projected 40% increase in revenue which underpinned the 2022 budget was not likely to materialize and therefore, our deficit will increase. The chaotic battle in Parliament over the budget and the passage of the budget did not also help matters. This created uncertainty and signal to the market that government may not be able to get most of its programmes passed in a tightly balanced Parliament. This further reinforced the lack of confidence by investors in the budget.”
“Furthermore, delays in implementing major tax reforms…appeared to support the assessment that the market will have difficulties in passing its programmes. To add to these negative market sentiments, there was a sovereign credit rating downgrade by Fitch and Moody’s as a result of concerns about fiscal and debt sustainability.”
He explained that these concerns he raised made investors to stop rolling over their holdings of Ghana’s foreign bonds.
He further disclosed that Ghana’s decision not to issue a sovereign bond in 2022 also worried investors.
This he lamented sent a negative signal about the adequacy of Ghana’s foreign exchange reserves.
“So they [investors] wanted to get a hold of the foreign exchange now, and this led to the demand for the US dollar on the market. The increases in interest rates in the US and other economies also made the cedi unattractive. And in February we had the conflict between Russia and Ukraine. Associated fuel price increases also put pressure on the local foreign exchange market.”