Economist Dr. Adu Owusu Sarkodie says that beyond prudent fiscal management, the country needs changes in its economic structure to curb the permanent decline in the value of the cedi.
He said the government needs to stimulate exports and cut imports so the central bank has enough foreign exchange to meet demand for dollars.
Dr. Owusu Sarkodie, in his paper titled “As long as economic fundamentals are weak, exchange rates will continue to expose them,'' said that economic fundamentals are not strong.
“Ghana's economy has not transformed significantly enough to industrialize and add value to exports. It remains an import-dependent economy. This is the main reason for the depreciation of the cedi since independence. has not significantly improved.”
“This situation has continued in recent days, with investors selling Ghanaian dollar-denominated domestic bonds and other international bonds. Due to downgrades by international credit rating agencies, the government is unable to borrow from the Eurobond market. “It means that the Bank of Ghana does not have enough foreign currency to meet the increased demand for foreign exchange that has caused the recent depreciation of the cedi,'' he explained.
Further, Dr. Owusu Sarkodie said that the long-term and durable solution is to increase exports and reduce imports so that the central bank has enough foreign exchange at its disposal to meet demand. “As is the tradition of most governments,” he added, “while not advisable, short- to medium-term measures would allow governments to borrow from international capital markets, issue dollar-denominated domestic bonds, and deplete foreign exchange reserves.” That’s the thing.”
“Governments will be able to access the Eurobond market only after they have demonstrated to the investment community their ability to mobilize domestic revenues for debt servicing. As a matter of urgency, governments will be able to There is a need to pass an electronic tax bill in the short term. That is why almost everything seems to be related to the tax on electronic transactions (E-Levy) proposal and why the government is so concerned about its passage. “It's about being attached,” he pointed out.
He said that in addition to E-Levy, the government can also demonstrate its ability to mobilize domestic revenue by focusing on other sources such as property taxes, tax exemptions and natural resources.
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