General

Entrepreneurs and market institutions rely on accurately forecasting future correlations between the Ghana Cedi and the United States Dollar to an alarming extent. We do this in order to better structure pricing, for optimal asset allocation, risk management, to secure better return on investments, etc. A volatile exchange rate becomes a major obstacle to peak economic growth and performance. Nobody likes that. Many a time have many of us chickened out of potentially lucrative deals because we feared or were almost assured the Cedi would take an unexpected beating at some point in the timeline. Nobody likes that too. On a macroeconomic level, it signals a red flag for foreign investment and international trade. The relationship between two countries can be largely influenced by the union of their currencies on the forex market. And like in any typical real-life union, one has more power than the other. The dominating currency – and everyone knows which of the two that is – establishes the value of the weaker one. But neither can exist alone because the demand for the stronger one is what gives it its value. And so, a bond of co-dependence is born. At a time when Ghana is weaning off of international aid, delicately inching more and more towards international collaboration and partnerships, it needs to establish a robust economic atmosphere. It is important to study the past and recent behaviour of the Cedi with the US Dollar for the betterment of the future of Ghana. Correcting the exchange rate system could solve some problems like trade imbalances and slow growth. Inappropriate exchange rate policies in the past have negatively affected imports, exports, investments, technology transfer, and ultimately economic growth. See that paragraph you just read? Sounds like I have some major key that could connect the dots and patch the cracks in our forex policies huh? At present in this feature article I do not. I find it essential to keep reminding readers that this is an opinion piece. I am giving to my best ability a very unbiased, independent statement of what is, or how common-sense dictates things should be. I only state facts, with very little theory. And the FACT today is that our present and incoming exchange rate policies are essential to the success of the implementation of the macroeconomic overhaul strategies of the current government. Fun Fact: The name Cedi is the Akan translation for “cowry shell”.  These shells in itself were not native to Ghana but were brought to Ghana by Arab slave traders and merchants, with origins in the Indian Ocean. And the cowry isn’t only associated to Ghana, not at all. The Chinese even used cowry shells or copies of the shells as currency for over 3000 years. OK now let’s go back, way back. Ghana at the time of independence Kwame Nkrumah was a widely popular figure pre-independence and when he led the nation out of colonial rule in 1957, the nation Ghana created its own currency through the new monetary authority, the Bank of Ghana. She called it the “Ghana Pound”. It followed the same methodology as the British denomination, keeping to units such as pound, shillings, and pence. From 1957-66, the Ghana Pound was fixed to the British Pound, which the Bretton Woods System approved. It was pegged at ¢2=£1, with adjustments being made only to settle any fundamental balance of payments disequilibria. So, keeping to a fixed exchange regime at that time was consistent with the thinking of the colonial era. Ghana had no control over the foreign exchange markets, which back then was in the hands of a few commercial banks. It was back in 1965, with a desire to conform to most of the world, that Ghana opted to leave the British colonial monetary system and adopted the widely accepted decimal system. And that was when a new currency was born, the currency we know now: THE CEDI. Nkrumah’s days in power were short-lived. His government was ousted in 1967, and so was his newly introduced currency. The name stayed, but because Nkrumah’s portrait was printed on those notes, a new cedi was introduced, literally. New times called for a new currency, or so they thought at the time. The New Cedi (N¢), as it was called, replaced the previous one at a rate of ¢1.20=N¢1.00. The post-Nkrumah era Ghana faced numerous leaders over the coming next decades. The country’s terms of trade worsened during the 1960s and the value of the cedi continued to fall. From 1967-72, my very best friend the IMF (read my last article to be in on this pun, then read the article before that article to be in on that pun) experimented with a flexible exchange rate. Successive governments ended up raising the cost of imports and consumer prices. By the 1970s the cedi was in big trouble. Its low value meant that any foreign currency could then be exchanged for plenty cedis at any time, much like the black market for dollars in recent times when the cedi’s value takes a dive. So, Ghanaians, especially those at the border, would smuggle minerals and produce like cocoa and others across the border to Togo, Burkina Faso and Côte d’Ivoire. They would trade and come back with CFA Francs (let’s call it Cefa as my mum still calls it). This cefa would be exchanged on the black market for the “plenty cedis” I just spoke of and they’d make huge profits. Illegal cedi operations through smuggling and other means became so widespread as the cedi continued to be weak. It got so bad that that by 1981, on the black market, you could get almost ten times the official rate value of the cedi. The era of Living Presidents I don’t think it would be appropriate to iterate the cedi’s performance under any living president. For one, that information would be easily attainable. Also, it has become such that the facts of our currency within these periods cannot

Let’s have a non-mathematical analysis of remittances. As usual, let’s stick to the facts. This is an opinion piece. I want to chat with you. I mean you can’t talk back but keep reading anyways. I don’t want boring statistics getting in the way of our conversation. And that’s what my column features are intended to be; conversations with you on whatever topic we decide to dissect. Today: An Independent Autopsy Of Remittances. We can leisurely describe remittances as domestic income that flows in from foreign economies resulting from locals moving to those foreign economies, whether permanently or temporarily. So, the parent in the States that send you a couple dollars for your upkeep? The shoes your friend schooling outside sent you as a birthday gift? The money that your relative abroad keeps sending to the family to build that big house that after 4 years and 400 money transfers that new house hasn’t even reached foundation level? Yup, those are all remittances. Pretty simple, right? Last year alone, Ghana bagged Three Billion United States Dollars’ worth of remittances. That’s $3,000,000,000 with nine zeros. To put that into perspective, within the whole of 2016 Ghana received foreign aid of $2.9 billion. Our non-traditional exports (NTEs) earnings in 2017 was $2.6 billion. And in 2018, the combined GDP’s of the Republic of The Gambia, the Republic of Seychelles and the Kingdom of Tonga was just about $3 billion. Yes, Tonga (officially the Kingdom of Tonga) is a real country. Let’s stick to the facts. This is an opinion piece. Very technical definitions of “Remittances” get very confusing. So, I turned to my very best friend for clarification: The International Monetary Fund (read my last article to be in on it). The IMF split remittances into two: “Compensation of employees” and “Personal transfers”. For Ghana, the “compensation of employees” would include income of migrant workers that will eventually leave, like say the Naija guy with a work permit, and locals employed by the embassies, foreign companies, international organisations etc. Basically, it’s the income of any foreigner who has a short-term job, or any Ghanaian with a job from a foreign company (IMF BPM6, 2009: page 272). “Personal transfers” (IMF BPM6, 2009: page 273) would encompass any transfers in cash or in kind made or received by Ghanaians here to or from those Ghanaians abroad. What that means is that if Uncle Borga sends down money from Germany, it’s remittance. If you pay the fees of your ward studying abroad, it’s also remittance. The not-so-obvious part of these two halves of the definition is this. If the Naija guy on a work permit in Ghana gets paid, he or she is not sending all the money overseas to family. There will be necessary living expenses and there will be chilling before something goes outside, but the FULL INCOME is counted as remittance. Also, the salaries of the Ghanaians employed by the embassies and the transnational companies are technically remittances even though those workers not foreigners nor are they transferring the monies anywhere. So technically, it should be clear that remittances might not necessarily have to be across borders; it can be within Ghana, technically. And there’s also this thing called “Social Remittances”. To explain that much easier, replace the cash or kind part of our definitions so far with all the knowledge, and values, and social and policy reforms, and innovative ideas and new technological skills that go from one end to the other. I just thought I should toss in that definition for good measure. We are still sticking to the facts. This is an opinion piece. There are about a quarter of a billion people (250,000,000) around the world living outside their home country. Immigration isn’t a fresh topic. The tales of leaving Ghana to seek greener pastures outside isn’t an unfamiliar tale. However, the scale of this at the turn of the 21st Century has been upturned. As far back as 2011 the number of Ghanaians in the diaspora was estimated to be 4 million people. Today, 8 years later I would have to copy-paste a source to confidently guess that number because things have changed. Ghanaians are more than ever moving back home and more willing to contribute to the national economy. The figures associated with our Remittances will only get bigger. In this current “Ghana Beyond Aid” era, I believe any fiscal avenue that pulls in such numbers independent of foreign involvement should warrant a closer look in addition to carefully placed structures that are curated to facilitate a boom under the proper economic climate. $3 billion is a lot of money. The millions of Ghanaians earning outside is a lot of people. Ghana’s economic targets “without aid” is one heck of a gargantuan ambition. The government has vocal on calls for the Ghanaian diaspora for get proactive in nation building. Vice-President Dr. Mahamudu Bawumia has previously said “It doesn’t matter if you’re a billionaire walking on the streets of America as a Blackman, they will see you no different from anybody walking on the streets of Africa, and so the emancipation of the people of African descent lies in the emancipation of Africa”. Aside the fact that I am pretty sure Jay Z and I would be viewed and treated and paparazzied differently on the streets of Bakersfield California, he is 100% correct in my opinion. The TRUE emancipation of the people of African descent lies in the emancipation of Africa herself. Ergo, the stock value of the Borga declines concurrently with a depreciation in stock of his homeland, which to many many whites, is just one big country called Africa. Fun Fact: August 2019 will mark the arrival of the first documented Africans from our continent to English America to be sold as indentured servants or involuntary labourers, a.k.a., slaves. We definitely are sticking to the facts. This is still 100% an opinion piece. Remittances are one of the most significant and tangible contributions of migrants to their home

First off, I don’t have the answer to what exactly happens next. Many opinion pieces on Ghana’s very unromantic breakup with the IMF have been said written hinted howled and argued out already through every medium possible. Ghana is on schedule to exit its $918 million bailout program with the International Monetary Fund (IMF). If our Finance Minister Ken Ofori-Atta has his way, our nation will never return to that relationship ever again. Yet, the ruckus on the matter comes as a surprise to me as I feel we should be used to a move like this by now. Kufuor made a similar move to resounding criticism and uproar much like what’s happening now. We shouldn’t be this surprised. Let’s stick to the facts. This is an opinion piece. When President John Kofi Agyekum Kufuor, leader of the New Patriotic Party back then, opted for the Heavily Indebted Poor Countries (HIPC) Initiative bank in 2001, it was based on the objective analysis of the economic situation of the country. He urged all UN agencies, the international community and foreign investors to have confidence in the government and continue bringing development to the nation. President Nana Addo Dankwa Akufo-Addo, current leader of the New Patriotic Party, has opted to pull Ghana out of the IMF this month, based on his objective analysis of the economic situation of the country. During this tenure the fiscal deficit has significantly improved and the party boasts of numerous economic milestones validated by the international community. He too, just as the former NPP leader aforementioned, urges all stakeholders to stay calm for he has deciphered the cause of our economic woes that keep driving us to the IMF: gross mismanagement. And do you doubt his diagnosis? Validation of the applicability of his cure is subject to time but has corruption and mismanagement not been the thorn in Ghana’s proverbial flesh since… ever? HIPC was never intended to end to all the problems and our loud presumably permanent exit from the IMF won’t end all our woes also. There was a positive yet critical support for the HIPC though, if memory serves me right. While the HIPC Initiative seeks to provide debt relief based on the implementation of poverty alleviation conditionalities governed by the IMF and the World Bank, the Kufuor Administration received the most financial assistance than any other in the history of Ghana. In fact, it was the third biggest recipient of British aid in Africa. In direct contrast this NPP government seems to be running away from aid. Why? If a man is to put out the fire in your concrete home and it might blow up your foundation pillars in the process, I’d say you handle your house fires IF YOU FEEL YOU CAN. Ken Ofori-Atta has been mighty confident about Ghana’s economic direction and his prophetic abilities on the economic direction of the nation in reaction to his stimuli should attain some recognition. Yes there is public outcry on the ground about hardships but tell me a period in Ghana within the last two decades that had a general unifying public consensus being “Ghana is now good oo”. It never happens. Our “good” economic status is always spoken about in retrospect. Former President Kufuor’s Economic and Finance team crafted the HIPC Initiative bailout. With the implementation of strategic governance, modernization of agriculture and rural development, enhanced social services, and vigorous infrastructure development, Ghana’s GDP quadrupled from £2.6 billion in 2000 to almost £11 billion. Ghana was spoken of as one of Africa’s success stories, and this is validated by the International Communities’ assessments at that time. What’s my point? My point is the next successive NPP Big Boss comes up with a radical move involving the IMF, stating strategic policy implementation, “discipline and systemic management in our national economy and its public finances” as his intended arsenal moving forward and it shouldn’t surprise you one bit. Let’s stick to the facts. This is an opinion piece. And fact is, the last time Ghana exited from the IMF we went running back in just two years. Do note though that the exit was under one party in 2006, and the proceeds of the running back came under another party in 2009. The IMF-approved US$602 million loan to Ghana in 2009 was intended to eliminate Ghana’s large fiscal imbalances. Conditionalities  for the loan included stabilization policies for economic growth and prosperity, reducing inflation, deferring statutory payments, and reining in government spending. When President Akufo-Addo defeated former President Mahama in December 2016 elections, the International Community’s evaluation of our economy appeared to have the former inherit an economy reeling from substantial public sector deficits, rising inflation, high unemployment, and a weakened currency from the latter. Akufo-Addo campaigned to end rampant government spending, create more jobs, and stop the financial crisis and actions are being taken in that direction. The 2018 budget and fiscal policy focused a downward review of electricity tariff and reeked of numerous material economic highlights. Long story short, by our Government’s standards, the country is now ready to weaned of IMF once again, presumably permanently. There are many benefits to working with the International Monetary Fund (IMF). These benefits aid in strengthening the public purse and sound economic regulation, improving transparency, the effectiveness of the inflation targets, controlling payroll, sizing up the civil service, and enhancing revenue collection. The program aims at macroeconomic stability to attain prosperity and to forge economic opportunities for all, while also protecting against the wrongful disbursement of public funds. However, IMF demands can create some strain on policies requisite at such and such a time for economic prosperity. This can unfortunately create poverty if not curbed. Borrowing money from the IMF can put restraints on the government, which might compromise national sovereignty in decision making and independence in more ways than one. While the IMF aims at controlling social spending and freezing wages, the wealth contribution is arguably to a tiny elite when mismanaged. Also, the IMF