A health economist, Dr. Gordon Abekah-Nkrumah, says suggestions that the Ghana cedi may have strengthened against the US dollar partially due to reduced imports from China over the outbreak of the coronavirus could be true.
However, Dr. Abekah-Nkrumah, speaking on the Citi Breakfast Show, stated that despite the gains made by the local currency, the reduced imports is likely to have an adverse impact on the country’s economy in the long-term.
“If you look at our relationship with China, I think the next effect will be negative because someone will argue that given that we import and if imports reduce, that is good for us. Now the point is that most of the items we import from China are items that we currently don’t have the capacity in-house to be able to respond if there is a shortfall.”
“So, that is definitely going to be negative. If people are not able to go to China and get their wares, what it means is that activity will slow down that will affect household income, which will also affect local consumption, so overall it could have a negative effect,” he stated.
The local currency has appreciated by more than 4.5 percent against the US dollar since the start of the year with the gains expected to last beyond the first quarter of the year.
Dr. Abeka-Nkrumah stated that the viral disease would have a devastating consequence on Ghana’s economy due to its dependency on Chinese imports in other key sectors.
“If you look at our construction sector, most of their inputs come from China. So, the fact is that you may have short-term appreciation in the currency, but if this should go on for a long time, where are you going to get these inputs to be able to continue production?” he quizzed.
“Remember that as a country, we don’t have a good social welfare system unlike other countries where they could say okay there is a shutdown, people should sit down and the government is going to pay them,” he stated.
Reduced trade activities in China cause of Cedi’s performance – Franklin Cudjoe
The President of policy think tank, Imani Africa, Franklin Cudjoe, has already called for more sustainable measures from the Bank of Ghana to stabilize the cedi despite the local currency’s recent stability.
Speaking to journalists on the sidelines of a pension programme organized by Axis Pension Trust, Mr. Cudjoe stated that external factors in China for example may have reduced the demand for dollars for trading leading to the cedi’s relative stability.
Although Mr. Cudjoe did not make specific reference to the ravaging coronavirus in China, suggestions are that trading activities in that country have reduced drastically due to the disease.