Extreme exchange rate volatility can be risky – Panelists

Panelists on an International Labour Organisation (ILO) Tripartite Roundtable Discussion have stated that extreme exchange rate volatility can be risky and hurt businesses.

The roundtable discussion was on productivity, jobs, and growth in Ghana, using the National Productivity Statistics Report from the Ghana Statistical Service (GSS) as a basis.

Dr Kwabena Nyarko Otoo, the Deputy Secretary General of the Ghana Trades Union Congress (TUC) and a panelist, said it was normal for Ghanaians to be jubilant about the appreciation of the cedis due to the rate at which the cedi depreciated in the past.

“The challenge, however, is that extreme volatility can be very risky and hurtful for some sectors. What is happening now is hurting exports,” he said.

He noted that what the business community wanted was a stable exchange rate that allows businesses to plan both for the short and long term.

“Given where we have come from, we should be allowed to pat ourselves on the back and be encouraged to do more to make sure that the cedi regains some of its loss and value,” he added.

Dr Otoo further stated that from an economic perspective, what is needed is a stable exchange rate, not one that depreciates sharply and appreciates sharply the next day.

Nana Poquah A. A. Adiamah, the National Coordinator of the Association of Ghana Apparel Manufacturers (AGAM), said they have mixed reactions to the appreciation of the cedi, indicating that export-oriented companies stand to lose.

Nana Adiamah stated: “We are watching how the currency will go and make business strategies based on that.”

Mr Kingsley Laar, an Economist and Senior Researcher at the Ghana Employers’ Association, re-echoed that the sustainability of businesses depends on the ability to predict the macroeconomy, including the exchange rate, and make decisions.

He added that exchange rate volatility makes decision-making difficult and impacts productivity, indicating that monetary policies from the central bank sometimes increase production costs and reduce the purchasing power of businesses.

Source: GNA

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