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Dr. Mahamadu Bawumia justifies that when he said that when your fundamentals are weak it will expose you, but in reality it has not exposed the N.P.P administration.
Speaking on Peace FM’s flagship programme dubbed “Kokrokoo” on Tuesday, 25th August, as monitored by this portal he said that, the country is running flexible exchange rate regime so the exchange rate will move according to the market forces but fundamentally the exchange rate is going to be determined by your inflation rate. If you have high inflation you will get higher depreciation, and if you have lower inflation you will have lower depreciation and that is the fundamental.
So when he said they will arrest the Cedi is not that they are going to lock it at one rate but essential ally lock it within the range of the fundamentals such that the lower inflation rate will produce lower depreciation. According to him from 2013-2016, the exchange rate was depreciating at 18% on average and when N.P.P assumed power in 2016-2019 is 8.7% on average because we’ve come down to 2% ,but we have 18% against 8% so his administration has reduced more than 50% by rate of the depreciation of the currency.
Looking at the rate where the currency was under the N.D.C., when they were in power in 2009, the currency in terms of the dollar to cedi it was one dollar to one cedi but by the time they left office it was 4 dollars to one cedi so it was quadrupling of the nominal rate. So when they came to meet the 4 dollars to 1 cedi if they quadrupled it will have been 16 but we are not at almost 6 cedi’s to a dollar, but when you talk about depreciating rate of exchange rate of about 8% on the average and you are having inflation around 10% you have really performed well because the exchange rate is consistent with the fundamentals.
Kwame Sefa Kayi referred him to his popular saying “if the fundamentals are weak the exchange rate will expose you” so at this point is the fundamentals are strong enough, Dr Bawumiah replied by saying that if it’s not strong enough we are in election year and we are in the month of August, and you have a depreciation of the currency of just around 2% is very remarkable and let’s hope it stays that way.
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