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NDC ‘killing’ private sector, says Osafo-Maafo
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- Parent Category: Our Country
- Category: Business & Finance
- Created on Friday, 29 June 2012 00:00
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NDC ‘killing’ private sector, says Osafo-Maafo
Former Minister of Finance and Economic Planning under the Kufuor-led NPP government, Yaw Osafo Maafo, says the mismanagement of the economy by Mills-Mahama NDC administration in its 3½ year rule has led to government crowding out and stifling private sector growth.
Mr Yaw Osafo Maafo, who is currently the Chairman of the Economic committee of the NPP, made this known in a press statement to address the state of the Ghanaian currency, the cedi.
According to him, government operations have been negatively affected by the rapid depreciation of the cedi under this government. He explained that government, as a result of this phenomenon, has had to find additional monies to pay for its dollar denominated statutory obligations such as payment of principal and interest on loans.“This additional unbudgeted expenditure will have to be financed through domestic borrowing which crowds out the private sector,” the NPP man maintained.
He added that businesses that import goods into the country are suffering tremendously from the depreciation of the cedi. He explained that working capital of businesses are being eroded on a daily basis rendering them bankrupt.
According to Yaw Osafo Maafo, the spiralling rise in the cost of living evident in the daily rise in the prices of goods and services on the market “is the result of the NDC government's inability to keep the currency stable.”“The government appears to be totally lost as to how to resolve this problem, while prices of goods and services keep rising by the day! This makes untenable the reported single digit inflation as there seems to be a disjoint between cost of goods and the inflation rate,” the NPP man said.
Yaw Osafo Maafo cited the basic supply and demand for foreign currency, trade imbalances, inflation, interest rates and the loss of confidence in a country’s economy as factors which influence the exchange rate of currencies.
Touching on Ghana’s trade imbalances he explained that Ghana as at 2011 had a trade deficit of some GH¢2.5 billion. This imbalance, according to Yaw Osafo Maafo, creates a shortfall which affects the value of the cedi, warning that once “our trade imbalances persist we expect the cedi depreciation to continue.”
On Inflation, the NPP finance guru explained that higher inflation figures would normally erode the value of a country’s currency and will result in citizens keeping foreign currencies. He added that a country with a lower and stable inflation will, however, expect a relatively stable exchange rate.
He was therefore at a loss as to why Ghana, with a reported low and stable inflation for eighteen months was witnessing a rapid depreciation of the Ghana cedi in recent months.
Similarly with regards to interest rates, Yaw Osafo Maafo maintained that countries with higher interest rates normally expect capital inflows from countries with lower interest rates, resulting in the appreciation of the currency in the country whose interest rates are higher because of the implied increased demand for that country’s currency.
“This will normally result in an appreciation of the Interest rates in Ghana are currently quite high (91 day Treasury Bill is about 21%). Under this condition one will have expected foreign capital to flow in Ghana to take advantage of this high interest rate. If this were to occur, it should result in an appreciation of the cedi. However the observed current rapid depreciation of the cedi tells a different story. Why is this the case?” he wondered.
Ghanaian’s according to Yaw Osafo Maafo, have lost confidence in the economy because of the NDC’s record of poor governance, eroding credibility in state institutions, fiscal excesses in an election year and the saga of fraudulent payments of “judgement debts” to political cronies.
Yaw Osafo Maafo urged the electorate to vote for vote for the able leadership of Nana Addo Dankwa Akufo-Addo and Dr. Mahmud Bawumia in the December polls, assuring Ghanaians that “an NPP government will ensure that the exchange rate is kept relatively stable as was done before.”
Fiifi Arhin Source: thestatesmanonline.com
