A Professor of Economics at the Institute of Fiscal Studies (IFS) has described the injection of $20 million into critical areas of the economy by the government of Ghana as part of efforts to shore up the cedi as a “joke”.

According to Professor Newman Kojo Kusi, the issue must be investigated thoroughly to know the real causes of the Cedi’s depreciation on the exchange rate market and not to simply pump $20 million into the system as a panacea.

He stated: “…it is a joke. It is a joke because I don’t think the excess demand is $20 million. I think they must investigate this problem very properly to know what the cause is. Is it speculative demand by traders wishing to hedge against further depreciation? Is it by the activities of non-residents who offload bonds to the local market? Is it because Ghana Commercial Bank, which is authorized to buy foreign exchange with our reserves who are using it for other things or is it because we simply do not have foreign exchange to put into the market?”

“…to put in $20 million is going to be a drop in the ocean and it is not going to solve any problem” Professor Kusi opined on ‘Me Man Nti’ on NEAT FM in Accra.

He made these comments in the wake of the Central Bank’s injection of $20 million into some “critical areas” of the Ghanaian economy to “save” the Cedi. The measure is part of several others to be rolled out soon by the Bank of Ghana to stabilize the local currency.

The cedi has since the beginning of the year suffered more than three per cent depreciation against other currencies, as demand for the dollar by local firms importing goods to drive the growing economy heavily outstripped the supply, thereby worsening the country's inflation outlook.

At the beginning of 2013, US$1 was exchanged at GH¢1.88 and ended the year at GH¢2.16, a 15 per cent decline, according to statistics by the Ghana Stock Exchange (GSE).

But Governor of the Bank of Ghana, Dr Henry Kofi Wampah, told the Daily Graphic last week that the decline in the value of currencies was not peculiar to Ghana, and was pervasive in many parts of the world

While promising that there were plans to roll out more stringent measures to fend off mounting inflation and stabilise the cedi, Dr Wampah also added that the Monetary Policy Committee (MPC) would announce a string of banking reserve restrictions to deal with the twin difficulty of inflation and depreciation of the cedi.

However, Professor Newman Kojo Kusi holds the view that “the demand for foreign exchange now, against the supply, is not a shortage of $20 million” so therefore what the Central Bank is attempting to do will be insignificant.