The recent appreciation of the Ghanaian cedi against major foreign currencies has sparked a debate about its underlying causes. While the ruling National Democratic Congress (NDC) government attributes the cedi’s resurgence to its prudent economic policies, opposition figures and some analysts contend that external factors, particularly the ongoing trade tensions between the United States and China, are the primary drivers. This disagreement highlights the complex interplay of domestic and international forces that influence currency fluctuations and underscores the difficulty in isolating specific causes for such economic shifts.
The NDC government, through Finance Minister Dr. Cassiel Ato Forson, has publicly claimed credit for the cedi’s improved performance. They argue that the implementation of homegrown economic measures, designed to stabilize the economy and strengthen the local currency, has directly led to the recent positive trend. These measures, they contend, have fostered investor confidence and improved the country’s economic outlook, thereby bolstering the cedi’s value. This stance aligns with the government’s narrative of effective economic management and serves to reinforce their credibility in the lead-up to potential elections.
However, Jerry Ahmed Shaib, the Second Deputy Minority Chief Whip and MP for Weija-Gbawe from the opposition New Patriotic Party (NPP), strongly disputes the NDC’s claims. He argues that the cedi’s appreciation is primarily a consequence of the weakening US dollar, which has been negatively impacted by the escalating trade war between the United States and China. This global economic conflict, he explains, has created uncertainty in international markets, leading investors to seek safer havens and consequently reducing demand for the dollar. As the dollar weakens, other currencies, including the cedi, tend to appreciate in relative terms.
Furthermore, Shaib suggests that the government’s delayed payments to contractors have inadvertently contributed to the cedi’s strengthening. By withholding payments, the government has effectively reduced its spending, thereby decreasing the demand for foreign currency to settle these obligations. This reduced demand, he argues, has played a role in easing pressure on the cedi and contributing to its recent gains. This perspective highlights the unintended consequences of government actions and how fiscal constraints can inadvertently influence currency markets.
While acknowledging that the cedi’s appreciation occurred under the NDC’s tenure, Shaib insists that the government cannot solely claim credit for this positive development. He emphasizes the significant influence of external factors, particularly the US-China trade war, in shaping the currency’s trajectory. He concedes that the government’s actions might have played a minor role, but maintains that the primary drivers are external and largely beyond the government’s control. This nuanced view recognizes the interplay of both domestic and international factors while challenging the government’s assertion of complete control over the cedi’s performance.
The debate surrounding the cedi’s appreciation underscores the complexity of economic analysis and the difficulty in attributing specific causes to macroeconomic trends. While the NDC government emphasizes its domestic policies, opposition figures and analysts point to the significant influence of global economic forces. This divergence of opinions highlights the importance of considering multiple perspectives and analyzing a range of factors when evaluating economic performance and predicting future trends. Ultimately, the true cause of the cedi’s appreciation is likely a combination of both domestic and international factors, with the relative contribution of each remaining a subject of ongoing debate and analysis.
