Impact Of Cedi’s Depreciation Must Focus On Household Income …Prof Gatsi

Dean of the School of Finance at the University of Cape Coast, Prof. John Gatsi, has pointed out that the government’s resort to macroeconomics jargons to explain away the plummeting value of the cedi does not do justice to those affected by the depreciation the most – households, debt servicing and import business.

In a write-up, he points out that the discussion must not veer around the essentials as this creates a deliberate placebo effect to the true impact of the depreciation the cedi is facing.

“We are not giving attention to the painful effects of depreciation on livelihood, Procurement, debt servicing and income erosion. Issues about depreciation are not mere macroeconomic articulation but critical livelihood concerns,” he wrote.

Prof. Gatsi adds, “Given that depreciation affects external debt portfolio, interest payment obligations on the external debts, price developments and cost structure of businesses differently, reporting these effects together with the rate of depreciation will be a productive service to Ghanaians. The cumulative changes in the cost structure of businesses covering the period for the rate of depreciation can reveal a lot.”

“Perhaps the effects of depreciation on household incomes, capital base protection for businesses, debt servicing capacity of government and cost of living should be a daily concern for the government.”

The write-up comes in the wake of the Akufo-Addo government’s attempts to explain away the fact that the cedi is now selling Ghc6.30 to a dollar.

According to the government, the rate of depreciation is slowing.

But Prof. Gatsi points out that this broad brush belittling of the impact of the cedi is unhelpful to the average businessman who now must spend more to import into the country.

“The rate of depreciation is not normally the cost of depreciation. Households and businesses are 99% of the time during the depreciation cycle, interested in the cost of depreciation whether or not the rate of depreciation is relatively low or high,” he said.

“If GHC5:50 exchanged for $1 at the beginning of the year and today you need GHC6:30 to exchange for $1 then a serious business person will be concerned about the rate of change in his or her cost structure, how the new cost structure will affect prices and whether or not the entire development may deepen or reduce income erosion.”