The Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana has linked the increase in labor unrest, high business costs, and the failure of some businesses to elevated foreign exchange rates and inflation. This insight comes from ISSER’s review of the recent mid-year budget report presented by Finance Minister Dr. Mohammed Amin Adam.
The report highlights that in the first half of 2024, the cedi depreciated by 18.6% against the US Dollar, 17.9% against the Pound Sterling, and 16.0% against the Euro. This follows a depreciation of 27.8% against the US Dollar, 31.9% against the Pound Sterling, and 30.3% against the Euro in 2023. In 2022, the cedi had depreciated by 30.0% against the US Dollar, 21.2% against the Pound Sterling, and 25.3% against the Euro.
The report noted, “This suggests some stabilization of the exchange rate over the past three years.” It also observed that, except for January, the cedi was generally more volatile against major currencies in the first half of 2024 compared to the same period in the previous year. Despite this increased volatility, the cumulative depreciation rates were relatively lower.
ISSER recommended that the government implement additional measures to curb the cedi’s depreciation against major trading currencies and boost exports to reduce foreign exchange demand. It also suggested that the central bank enforce foreign exchange regulations more strictly and enhance its presence in the exchange rate market.
Regarding inflation, the report referenced June 2024 inflation, which decreased to 22.8%, down from a peak of 54.6% in December 2022. However, it noted that this rate remains high compared to the 12.6% inflation recorded in December 2021. ISSER urged the government to investigate the commodities driving inflation and address the underlying causes. The report suggested that improving road infrastructure in key agricultural areas and reducing foreign exchange rates could help lower transportation and fuel costs, thereby reducing food and non-food inflation to single digits.
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