Vice President Dr Mahamudu Bawumia has said when he said he would arrest the cedi and lock it up, he did not mean the government was going to lock the cedi at one rate but, essentially, lock it within the range of the fundamentals such that the lower inflation rate will produce lower depreciation.
Giving account of its 100 days in office, Dr Bawumia at a town hall meeting in 2017, said the free fall of the cedi had been arrested, and the keys given to the Inspector-General of Police (IGP) for safekeeping.
But as of today, Tuesday, 25 August 2020, one dollar is equivalent to almost GHS6.
Talking about his promise of arresting the dollar in an interview on Accra-based Peace FM on Tuesday, 25 August 2020, Dr Bawumia said the NPP has done better at managing the free fall of the cedi than the main opposition National Democratic Congress (NDC) did during their time in office.
He explained that: “We are running a flexible exchange rate regime; we don’t do fixed exchange rate regime. So, the exchange rate moves according to the market forces but fundamentally, the exchange rate is going to be determined by your inflation rate”.
“Other things being equal, if you have high inflation, you’ll have high depreciation; if you have lower inflation, you’ll get lower depreciation; that’s the fundamental. So, when we said we were going to arrest the cedi, it doesn’t mean we are going to lock it at one rate but essentially lock it within the range of the fundamentals such that the lower inflation rate will produce lower depreciation.
“[From] 2013 to 2015, the exchange rate was depreciating by 18 per cent on average. When we came in 2016 to 2019, it is 8.7 per cent on average…So, we have reduced by 50 per cent, the rate of depreciation of the currency.
“Our currency, under the NDC, when they came to power, was $1 to GHS1 but by the time they left office, they had taken it to $1 to GHS4.
“So, it was a quadrupling of the nominal rate of the cedi.
“When we came to power, if we had also quadrupled it, we would have had $1 to GHS16.
“But we are at almost GHS6 today”, Dr Bawumia contrasted.
He said: “If we had followed their trajectory, we would have been talking about GHS16 [to a dollar]”.
“But when you talk about depreciating at an exchange rate of 8 per cent on average and you’re having inflation around that amount…you have really performed well because the exchange rate is consistent with the fundamentals”, Dr Bawumia said.