Friday, September 11, 2015

Economic Prospects for Ghana

The Ghanaian economy's prospects for the short and medium terms remains quite grim. There does not seem any possible way to improve the value of the cedi to more than 3.5 to the dollar before the end of the year and it is quite likely that the exchange rate will be worse than 4.5 to one. It is currently 4 to one down from 1.6 to one when I started working here in 2011. In real terms this means my and everybody else paid in cedis rather than hard currency has seen their purchasing power decline by two thirds. The devaluation of the Chinese Yuan has put even more pressure on the currency in addition to the ever increasing problem of an ever expanding import bill in dollars and very low cocoa prices. Short of actually creating a value added export industry there is no solution to this problem. Unfortunately, there has been no efforts in this direction since the 24 February 1966 coup and it is unlikely that anything will change in the next fifty years on this front. The leadership to convert Ghana from an import based economy to one based on the export of manufactured or even agricultural goods other than cocoa has been completely absent among its civilian politicians since the overthrow of Nkrumah. The lack of electricity has not helped matters. In fact by discouraging foreign investment and hampering what little manufacturing exists it has put even more downward pressure on the cedi. Even important public institutions like universities and hospitals do not have electricity.  This week the university had only two and a half days of electricity, hardly the makings of a "world class university." I don't think there is any hope for the cedi. Eventually Ghana is going to either have to voluntarily get rid of it like Ecuador did or lose it involuntarily like Zimbabwe did. Only after one of those two events will it be possible to have a currency that does not resemble the German Mark during the Weimar Republic.

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