Senior Minister Yaw Osafo Maafo has predicted that the Ghana cedi will stablise within a month after foreign investors have properly studied the 2017 budget.
He said investors have withheld dollars because they are waking up to the reality that the economic performance in last quarter of 2016 was poor.
“When it turned out that your growth was 3.6 percent and you deficit was 10.35 percent what do you expect your external investors to do? [they] will de-invest” he explained to Joy News.
In 2016, the cedi depreciated by 9.5 percent and 5.4 percent against the dollar and the euro, respectively.
But in the last three months after the New Patriotic Party took reins of government, the cedi has lost value to the dollar by 6 percent. A dollar is going for GHC4.70. It was about GHC4 in December 2016.
The cedi depreciates in two ways, a demand route which means more businesses are looking for dollars or the supply route which means investors are not releasing dollars into the system.
The former Finance Minister Osafo Maafo believes there was a ‘cover-up’ of ‘the true economic situation’ which encouraged investors to keep on pushing dollars into the system resulting in some stability.
But the final 2016 economic data released in December showed economic growth was finally 3.6 percent against a revised target of 4.1percent.
The overall budget deficit on a commitment basis, the fiscal deficit was 10.3 percent of GDP against a target of 5.3 percent.
These indices have deflated investor confidence in the short-term, he suggested.
But after government released its 2017 economic direction, the confidence of the investor community is expected to return.
This is because the budget contains targets aimed at bridging the deficit and improving foreign reserves which should assure investors the government is working to turn the economy around.
Government has set an overall fiscal deficit of 6.5 percent of GDP and Gross Foreign Assets to cover at least three months of imports of goods and services.
“It takes about three weeks to a one month for people to respond”, he said.
“People take the time to make a decision and [foreign investors] have to study the budget see our direction and I assure you that the cedi will begin to stabilise”, he said.