1 March 2019

Abaa Fo Obi Lɛ Nane – The Cedi and Bandaid Economics.

On 24th July 2015, I posted an article with the above title on Facebook. Abaa fo obi lɛ nane, a very popular jama song in Ga means, your child’s leg will be amputated.

In said article, I intimated that the Government of Ghana (GoG) was treating the issue of the cedi in the same manner a mindless mother in the Ga idiom above treated the wound on her ‘’precious’’ daughter’s leg.

In the end, the leg became gangrenous and had to be amputated. Let’s first agree that laws of economics do not obey slogans and propaganda. That is clear.

In 2014, the cedi performed the worst in the whole world, and led to the unprecedented precipitous fall of GDP by 21%. When Greece’s GDP fell by 2.3%, the whole EU went into epilepticus convulsions.

Let me explain the link between a domestic currency and GDP – Gross DOMESTIC Product.

GDP is calculated in domestic currency and expressed in US$ dollars for international comparability.
In November 2018, Ghana’s rebased GDP Ghc 256b @4.80 to the $, our GDP=$53.3b.

1st March 2019, $=Ghc5.5, the Ghc256b=$46.5. Loss of $7b. Add rate of growth and subtract rate of population and inflation, and the real GDP is close to $40b. This is a disaster. We’re heading to the abyss if the bandaid economics continues.

In 2019, the GoG is still treating the ‘’cedi wound’’ with bandaid – lies and propaganda. Nana said he was upset and would fix the cedi. The technocrats from the research department of BoG are saying, things would get worse. Who do you believe?

When I wrote that article in 2015, followers from NPP thought I was very good because I was hitting JDM, their arch enemy. Some from the NDC also thought I was ‘’campaigning’’ for NPP.

The primitive mindset of the political apparatchiks was in full force. All I did was hit at bad governance, especially fiscal indiscipline, then and more so now.

I mentioned 6 factors that influence the value of a currency. One o of them which I will talk about one today is speculation.

Speculation in my opinion is quasi-science; suggestive but not certain, estimation of the direction of an economy etc. In totality, it’s an expression of confidence, not rumour mongering.

When data inspires confidence, speculation is positive and the economy booms. The reverse is equally true – zero confidence goes with negative speculation and failing economy.

Who’ll have confidence in an economy that has no debt ceiling – like Mansa at Osu Market, she buys whatever she sees on the heads of passing hawkers – it may be a cathedral, free boarding school, new regions and more districts – until her capital dries out. And we lie to justify and defend everything.

Who’ll have confidence in an economy run by liars? Is it possible our Ananse DNA is the cause of the lies we tell so shamelessly? We lied as children. Even after 70 years when living in the period of grace, we are still lying.

We are adding 12 more ministers and deputies to set a new world record total of 123 because of those useless 6 new regions. Now we have a minister of state in the Office of the Senior Minister?

Hey, Nana how does this inspire confidence? Do we think those we expect to invest in our country are stupid?

We can put the blame all the external factors that adversely affect the cedi, but we cannot blame anyone for speculating on the basis of our weak fundamentals and wrong decisions and policies.

Just imagine the confidence the world will have if we come out with a government of 25 ministers, a Parliament of 100MPs and only 55 districts? The investment world loves fiscal discipline. Don’t believe any Kwaku Ananse, the cedi will fall if confidence dries out and negative speculation looms.

God Save Ghana.