Vice President Mahamudu Bawumia has attributed the drastic depreciation of the local currency to challenges in approving the 2022 budget and the Russia-Ukraine war.
According to him, the situation brought about low investor confidence in Ghana’s economy among others.
“The financial markets’ assessments of the 2022 budget, unfortunately, concluded that our projected 40% increase in revenue which underpinned the 2022 budget was not likely to materialize and therefore, our deficit will increase,” he disclosed during Danquah Institute and the NPP’s TESCON organized an event on the state of the economy on Thursday, April 7, 2022.
He continued “The chaotic battle in Parliament over the budget and the passage of the budget did not also help matters. This created uncertainty and signal to the market that government may not be able to get most of its programmes passed in a tightly balanced Parliament. This further reinforced the lack of confidence by investors in the budget.”
Vice President Bawumia also mentioned the degrading of the economy by international rating agencies as some of the factors.
“Furthermore, delays in implementing major tax reforms appeared to support the assessment that the market will have difficulties in passing its programmes. To add to these negative market sentiments, there was a sovereign credit rating downgrade by Fitch and Moody’s as a result of concerns about fiscal and debt sustainability.”
“So they wanted to get a hold of the foreign exchange now, and this led to the demand for the US dollar on the market. The increases in interest rates in the US and other economies also made the cedi unattractive. And in February we had the conflict between Russia and Ukraine. Associated fuel price increases also put pressure on the local foreign exchange market.”
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