Dr. George Domfe, a Development Economist and Senior Research Fellow at the Centre for Social Policy Studies (CSPS) within the College of Humanities at the University of Ghana, has highlighted that Ghana’s present path toward economic recovery ought to be attributed to the previous Finance Minister, Ken Ofori-Atta.
The founding president of Africa Policy Lens, APL, asserts that the choice to implement a debt restructuring program amid the economic difficulties Ghana encountered because of external factors has been primarily responsible for the current recovery of the nation’s economy.
"One commendable aspect about Ken Ofori-Atta is his implementation of the debt restructuring program! This initiative significantly reduced the amount of foreign currency leaving the country to cover external interest payments and amortizations. These actions by the previous finance minister were crucial in securing Ghana's economic future. It warrants celebration from Ghanaians," he asserted.
"Without the DDEP and other crucial policies implemented by the former Finance Minister, Ken Ofori-Atta, the present economic performance wouldn’t have been achievable. The IMF program has contributed to the current BOG reserves, which allowed the BOG to intervene in the foreign exchange market with nearly $1 billion within two months," he disclosed.
Certainly, within the framework of this initiative, Ghana aimed at bolstering its reserve levels! Currently, Ghana operates under a MANAGED FLOATING EXCHANGE RATE SYSTEM. In this system, the central bank occasionally steps into the domestic foreign-exchange market to safeguard the national currency. As highlighted, the Bank of Ghana (BOG) has been actively involved in these interventions, largely contributing to the exceptional performance of the cedi, he added.
He stated, 'You can only provide something if you possess it; thus, the Bank of Ghana is distributing additional funds to safeguard the cedi due to higher reserves. These reserves were augmented by Ken Ofori-Atta via his strategic policy measures.'
Regarding whether the Bank of Ghana and the Finance Ministry could have introduced even greater amounts of foreign currency into the market, here’s what Dr. Domfe stated: "Certainly, the former government might have taken similar actions; however, the international conditions were not as favorable back then. As a matter of fact, Dr. Ernest Addison pointed out that he was capable of reducing the exchange rate to GHS 10 per US dollar, yet such interference would not have been warranted at that juncture."
"Currently, there is reduced demand for foreign currency due to several factors: (A) a decline in international crude oil prices has led to BDCs requiring significantly fewer foreign funds for imported refined petroleum products; (B) the government's decision not to settle contractor debts; and (C) non-payment of statuary obligations. Additionally, increased earnings from gold exports and higher remittance amounts have bolstered the availability of foreign currency supplies. Consequently, when the Bank of Ghana injects an impressive $1 billion over two months, it isn’t surprising to observe such positive performance from the cedi," clarified Dr. Domfe.
He added that the accord reached with the bondholders significantly affected Ghana's debt burden, leading to a 37% decrease in the nominal value of the country’s debt—amounting to approximately $5 billion—and saving around $4.3 billion in debt servicing throughout the IMF program. Additionally, interest rates on this bonded debt have dropped from an average of 8% to under 5%.
Dr. George Domfe additionally remarked that this considerable accomplishment positions the nation for a more promising future, allowing the government to concentrate on fostering sustainable economic progress and development. He characterized this milestone as an indication of Ghana’s commitment to restoring its economy, thereby paving the way for enhanced financial stewardship and enduring growth.
Provided by Syndigate Media Inc. ( Syndigate.info ).
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