As a Public Sector Economist, I have spent months trying to understand the statement: “Bawumia destroyed the economy by pushing the exchange rate to $1 = GHS17.”
- On 7th January 2017, when the NPP government assumed office, $1 traded at GHS4.20.
- By 7th January 2021, the rate was $1 = GHS5.85, indicating that during the government’s first term, the cedi depreciated by a cumulative 27%. This period remains one of the most stable eras in Ghana’s recent economic history in terms of currency performance.
- In January 2022, the rate stood at $1 = GHS6.20, while the Bank of Ghana’s reserves were around $9.9 billion, sufficient to maintain stability. However, the outbreak of the Russia–Ukraine war caused global disruptions—crude oil prices surged from $72 to $121 per barrel, freight costs increased by 300%, and major economies such as the UK, USA, and Germany recorded their highest inflation levels in decades.
- Consequently, Ghanaian importers required more U.S. dollars to import the same volume of goods, creating severe pressure on the cedi. The Bank of Ghana intervened heavily, drawing down its reserves to stabilize the exchange rate. By July 2022, the rate had risen to $1 = GHS8.20, but at this point, foreign reserves were nearly depleted, limiting further intervention.
- By October 2022, the interbank exchange rate exceeded GHS15. However, by December 2022, the rate appreciated to around GHS8, after the Bank of Ghana secured additional foreign exchange support.
- Therefore, why should Dr. Bawumia be blamed for this depreciation? The sharp fall of the cedi in 2022 was driven almost entirely by global shocks, not domestic policy failures.
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By
Dr. George Domfe- Development Economist University of Ghana