Members of the Ghana Union of Traders Association (GUTA) have currently shut their shops in the Central Business District of Accra in protest against the continuous fall of the local currency, the Ghana Cedi, against the major world currencies, especially the United States of American Dollar.
Earlier their counterparts in Kumasi had embarked on a similar exercise, but following the intervention of Manhyia Palace, the decision was reversed.
Just yesterday, the Association of Sachet and Packaged Water Producers also issued a strongly worded press statement over the free fall of the Cedi, and called on the government to, as a matter of urgency, take strategic steps to stabilise the exchange rate.
According to the Association, the packaged water industry relies heavily on imported plastic pallets/granules used in the manufacture of the Polythene films and pet bottle preforms that are used to package the treated water for consumers.
Signed by Magnus Nunoo, President of the Association, the statement contended that packaging alone formed about 60% of the production cost for sachet and bottled water. Diesel fuel used for distributing the products to market centres for consumers was around 15% of the cost, as at the third quarter of last year.
“Due to [the] high increase of diesel and other petroleum products, diesel fuel for distributing packaged water to consumer centres now exceeds 25% of the product price. Electricity cost, which used to be around 15% of the product price, has increased to 20%, as a result of the recent increase in utility tariffs.
“All the above sum up beyond 95% per the last packaged water new prices announced in September 2022 without considering cost of capital, salaries and wages, taxes, bank charges, regulatory fees, machine and equipment cost/depreciation/parts replacement, distribution vehicles and its maintenance costs and other overheads,” the statement noted.
Though the water producers fell short of announcing new retail price for the commodity, it is obvious that they are preparing the grounds for another increment due to the fall of the cedi against the dollar.
Much as The Chronicle agrees that the current economic crisis facing the country is part of the larger world economic meltdown, a number of factors have contributed to make our situation worse.
The down grading of our financial standing from CCC to CC or to junk status by international rating agency, Fitch, meant we can no more go back to the capital market to borrow dollars and use it to shore-up the cedi. Having noticed this, the local investors quickly started investing in the dollar by buying them from the market.
In a nutshell, traders who genuinely need the dollar to import essential commodities are not getting them because a few people are suspiciously holding the American bucks in their homes.
The recent $1.3 billion cocoa syndicated loan and the $750 million secured from the African Export-Import Bank has not helped to stabilise the situation because people appear to be buying the dollar and stashing them at home. The conundrum here is that whilst the importers are not getting the dollar from the banks, it is thriving on the ‘black market’.
The big question is, where are these black marketers getting the dollar from? Are the banks smuggling it to them for hyper-profit or what?
It is trite economic knowledge that when demand outstrip supply, prices of goods and services will shoot up. With the demand for the dollar far outweighing what the market can supply, the strength of the cedi will obviously become weak.
It is, therefore, high time, in our opinion, that the Bank of Ghana (BoG) starts controlling the distribution of the dollar in the country. The Chronicle suggests that importers who are crying foul over the loss of their capital as a result of the weak cedi should furnish their bank documents backing the products they are importing. The BoG, through their respective banks, will then transfer the dollar to the seller of the products being imported.
We know that this kind of arrangement is already in place, but it is not rigidly enforced. The way things are going, The Chronicle is afraid that worse things can befall this country if remedial measures are not put in place to ameliorate the plight of the people.
For our currency to be described as the worst performing currency in the world is not an achievement we should be proud of and that is why an innovative ways must be adopted to arrest the free fall of the cedi.
Whilst direct foreign investment in our country is welcome, we should also be smart to insert into some of the agreements the amount of dollars investors can repatriate as profit within a year. This will minimise the flight of the dollar out of the country and thereby putting pressure on the local currency.