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I came across Dr. Bawumia’s explanation of why the Ghanaian cedi is weakening against the US dollar and wondered why he is playing the innocent minds of Ghanaians just to paint himself and the NPP government competent. Let me inform you that I do not buy into the politics of debt and exchange rate; because I know that several factors come into play when we are dealing with the exchange rate. However, I need to write this because Dr. Bawumia never believed that external factors could weaken the cedi – at least based on his assertions during the campaign. He stated that the weakening cedi was due to weak fundamentals and incompetence on the part of the NDC government; as such, we need to measure him using the same metrics he applied to the past government.

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To start with, the Dr. is singing praises of the government’s debt management by referencing the Debt to GDP ratio. With all due respect that ratio means very little. The United States currently has a debt to GDP ratio of around 78%; that is estimated to reach 96% by 2028. Ghana, on the other hand, has a lower ratio of 69%. While the US economy is doing well, with the lowest unemployment rate ever; stronger currency, and higher income levels, Ghana is struggling to absorb the dense population of unemployed graduates; how do we explain that? There may be some good out of a lower debt to GDP ratio, the emphasis on it however, is weak; given available facts. See below chat for the US debt to GDP ratio and available projections.

The truth about Ghana’s debt is that, how much each Ghanaian owed of the total debt in 2016 would be less than how much we owe now (holding the population constant). The total debt stock has increased and that is a fact. The government is finding ways to hide it by simply dividing it over the GDP to tell stories. To make matters worse, they account for some borrowings as barter trade – yet they are paying interest on them. In barter trade, there is no repayment and no interest; you give me your product in exchange of mine, and that ends it. If I have to return yours, it means I borrowed it and that is debt. This is basic and simple!

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Secondly, Dr. Bawumia, who said the depreciation of the cedi in years prior to 2017 was due to weak fundamentals and incompetence is now saying it is because of the actions taken by the US. This is just unbelievable! Is he saying that during the years he blamed NDC for the cedis’ depreciation, US was not taking economic policies that made its products attractive to investors? Or NDC was managing the US economy then? When the Dr. was blaming NDC for the weakening cedi, I mentioned that regional currencies were bound to suffer under the dollar because the US economy was growing out of the depression of the 2000s. I actually shared the DOW Jones’ industrial average to explain it.

 

During the depression, US investments gave negative or very low returns; hence investors moved their funds somewhere. But as the economy started picking up and the DOW Jones Index recorded its highest performance ever, investors started coming back, demanding more US dollars and pushing the price to pay for a dollar upwards. This was happening before Dr. Bawumia became the vice president – yet, he turned a blind eye on it and called people all types of names. What has changed? Because he is on the front seat, he wants to tell us it is not more what he blamed it on? Have you ever heard of double standards?

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The learned man listed the rate of depreciation from 2012 to 2017 to explain how good his government is at managing the exchange rate; if you carefully look at the numbers presented, you will see that the rate moved from 31.3% in 2014 to 15.6% in 2015 (that was 50% improvement); then from 15.6% in 2015 to 9.6% in 2016 (Another 38% improvement over the 2015 rate of depreciation). It moved from 9.6% in 2016 to 4.9% in 2017 (48% improvement over the 2016 performance). Can you see the declining trend? So it is not like the depreciation was worsening when NPP took over, it was improving on year by year basis starting from 2015. So what is the noise here for?

Now I want to give the vice president the benefit of the doubt but with questions. Yes, the US action contributed to the depreciation of the cedi. Sir, what are you doing to counter that action as a member of the economic management team and as a macro – economic management wizard? Forget about the “poor performance” by NDC, the depreciation is not affecting NDC alone, it is affecting every Ghanaian; please stop reminding NDC of their “poor performance” and tell Ghanaians the steps you are taking to remedy this. NDC was so bad that the Ghanaian people rejected them and gave you the key to managing the country – does it make sense to keep talking about their performance relative to yours?

It is the economic management team of the US that decided to increase interest rates, what is the Ghanaian economic management team doing to make our products (including investment products) more attractive to investors so they can chase our weak cedi like they are chasing the dollar? It will make no sense for you to tell Ghanaians that the cedi is weakening because of the US policies and that ends it; you mean we have to wait until US reverses their policies? What policy measures are you putting in place to arrest the situation – we actually don’t care about the Brazilian Peso and the Pound Sterling – we just want to know what you are doing to save the cedi.

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With all due respect Dr. Bawumia, what you are telling Ghanaians is similar to a businessman who says his goods are not doing well in the market because his competitor adopted measures to make his goods more attractive to customers. How can we explain this? With your intelligence and economic management prowess, we expect better than this….

And before I end, please be sensitive to the average Ghanaian, this is not a campaign season anymore; direct your statements to the plight of the poor Ghanaian and not the NDC; the voice is not coming from only NDC, but every well-meaning Ghanaian.

Thanks!

Abubakari Sadiq Iddrisu (Zuu Bukali of Facebook)

Certified Public Accountant, New York and New Jersey, USA

Advanced Audit Senior – Financial Services Office, Banking and Capital Markets at Ernst & Young LLP – NY, USA.

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