A financial analyst, Michael Nii Yarboi Annan has suggested that it will be difficult for Ghanaian importers to trade more in the Chinese Yuan when doing business with China.
The Ghana Union of Traders (GUTA) has called on the Government of Ghana to fast-track plans for trading in the Chinese yuan instead of the US dollar as the cedi keeps depreciating against major trading currencies.
GUTA President, Dr. Joseph Obeng who made the proposal contended that such a move was expected to reduce pressure on the Cedi because imports will not be done with US dollars.
Speaking on Ideas Exchange on TV XYZ, the analyst indicated that the calls by GUTA could have been possible if the government of Ghana’s debt stock had not hit the roof.
“You are able to do that [trade with Yuan] if you don’t have debt sitting at your back. You have a heavy debt sitting at your back and those you want to fight are the very people you owe those debts in their currencies,” Yarboi Annan noted and went on to ask, “So how do you fight them?”
“It’s going to be challenging to do that. The issue is that even China demands the dollar more than the Yuan, so it is not just easier to say that ‘oh we would accept the Yuan so let’s trade with the Yuan.’ China also, with all the trade wars and all that is going on, demands a certain amount of dollar to remain relevant and competitive in the global market,” he explained.
Ghana’s economy nears crumbling as the country’s debt stock hits high distress levels. Currently, Ghana’s public debt stock stands at a staggering 341.8 billion Ghana cedis with a corresponding debt to GDP ratio of more than 77% as of September ending 2021.
Analysts predict that the current debt situation could get worse by the end of September if proper interventions are not implemented. One of them is Prof Godfred Bokpin of the University of Ghana Business School (UGBS).
Although most of Ghana’s imports currently come from China because of cheaper costs when compared to similar local goods, Yarboi Annan believes it is going to be a tough task to embark on.
Yarboi Annan told host Eric Ahianyo that negotiations could be made to have Ghanaians trade in Yuan but the decision is likely to hit the rocks in China.
“You will deal with individual businesses in China and not the government. You might have an agreement with the government of China but individual businesses will still demand the dollars,” he added.
To him, “the bottom line is whether we as a country are prepared to go the Nigeria way.”
He said the government of Nigeria keeps on instituting measures to deal with price variations and he wished the government of Ghana intervened to control the prices of some goods in the country.
Measures to stabilise Ghana’s currency
Meanwhile, the Minister for Finance, Ken Ofori-Atta has outlined measures to curb the free fall of the Ghana cedi.
Addressing Ghanaians on Thursday, March 24, 2022, on the back of a crunch cabinet retreat last week, Mr. Ofori-Atta stated, the government is to conclude an external financing arrangement of up to US$2 billion in the next 2-6 weeks in line with approved external financing for 2022 and for liability management.
The Ministry of Finance, he said, “will work with the Central Bank to review the foreign exchange retention policy to ensure multinational companies in the extractive sectors retain foreign exchange earnings, from the sale of our resources, in the country.”
By Henryson Okrah|Myxyzonline.com|Ghana