GUTA to incoming govt: Stabilise Local Currency

– To secure thriving business environment

Story: Isaac AIDOO, Accra

AS a new government takes office in Ghana on January 7, 2025, the President of the Ghana Union of Traders Association (GUTA), Dr. Joseph Obeng, is calling for sustained measures to stabilise the local currency to secure a thriving business environment.

Speaking during an interview with Zed 101.9 FM, Dr. Obeng reflected on the economic challenges and gains of 2024, emphasizing the importance of consolidating improvements in economic indicators during this critical period of change.

The depreciation of the Ghanaian cedi earlier in the year posed significant challenges to businesses. The local currency saw a sharp decline against major international currencies such as the US dollar, British pound, and euro, with the cedi losing approximately 19.35%, 19.19%, and 15.24% of its value respectively by mid-December, according to the Bank of Ghana’s interbank rates.

This depreciation raised import costs, increased inflationary pressures, and constrained profit margins for traders who rely heavily on imported goods.

Currency Volatility

Dr. Obeng highlighted that such fluctuations had a cascading effect on business operations. “Currency volatility directly impacts pricing, inflation, and interest rates, which are critical factors for businesses. A stable exchange rate is essential for long-term planning and growth,” he explained.

While traders struggled in the year’s first half, stabilization efforts in the last quarter brought some relief. The cedi’s performance improved modestly following interventions by the Bank of Ghana (BoG), including increased foreign exchange auctions and tighter monetary policies aimed at reducing inflation and stabilizing the local currency.

Ghana operates a managed floating exchange rate regime, where the value of the cedi is primarily determined by market forces of demand and supply, but with occasional interventions by the BoG to reduce excessive volatility.

While this approach allows flexibility, it also exposes the cedi to external shocks, such as fluctuations in global commodity prices and capital flow reversals, which have been significant challenges for Ghana’s economy.

Reliance on Imports

In 2024, Ghana’s reliance on imports for essential goods and services compounded the pressure on the cedi, especially as global crude oil prices fluctuated and demand for foreign exchange outpaced supply.

Dr. Obeng noted that this environment underscored the need for policies that strengthen the local currency by boosting export diversification and enhancing domestic production.

Dr. Obeng emphasized the interplay between inflation reduction, interest rate control, and currency stability, describing these elements as “the lubricants we need to keep the private sector – the engine of growth – running.”

He commended the government and the central bank for measures that reduced inflation from a peak of over 54% in January to approximately 20.4% by November 2024.

However, he warned that policy inconsistencies could erode these gains. “Whatever gains we achieve must be sustained to have the necessary effect on the business community,” he said.

He urged policymakers to adopt long-term strategies that shield the private sector from external shocks, ensuring that businesses can thrive even in challenging macroeconomic conditions.

Future Outlook

With enhanced fiscal and monetary policies, the business community is optimistic about further improvements in Ghana’s macroeconomic stability in 2025. Recent commitments by the government to reduce debt levels under an IMF-supported program, coupled with efforts to boost local production and export competitiveness, are seen as positive steps toward achieving sustainable economic growth.

Dr. Obeng concluded by reaffirming GUTA’s readiness to collaborate with the government in implementing business-friendly policies. “The business community remains a critical partner in driving the economy forward. Stability, consistency, and collaboration are the keys to unlocking Ghana’s economic potential,” he remarked.

The GUTA President’s remarks come at a time when Ghana’s economy is navigating a complex mix of opportunities and challenges. While the business community welcomes the recent stabilization of the cedi, concerns remain over external factors such as rising global interest rates, supply chain disruptions, and geopolitical uncertainties.

For Ghana’s traders, the coming year offers an opportunity to leverage improving economic indicators to rebuild confidence, expand operations, and contribute to national development. As Dr. Obeng aptly put it, “sustainability in economic policies will ensure that the gains made trickle down positively to all stakeholders, creating an environment conducive to trade and industry growth.”