“I Still Stand by Assertion That If the Fundamentals are Weak, the Exchange Rate will Expose You” – Bawumia

The flag bearer of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia, has reiterated his belief that “if the fundamentals are weak, the exchange rate will expose you.” This statement, originally made during the NPP’s 2016 campaign, reflects his view that an exchange rate mirrors a government’s strength when its economic fundamentals are strong.

In an interview with AfricaWatch Magazine, Dr. Bawumia attributed the current fluctuations in the exchange rate to global crises such as the Russia-Ukraine conflict and the 2019 COVID pandemic.

He stated that Ghana’s economy was performing well until these shocks weakened it, leading to the current situation.

When asked if he still stands by his statement given the current exchange rate, Dr. Bawumia responded affirmatively, highlighting that between 2017 and 2021, when Ghana’s fiscal deficit, inflation, GDP growth, external balances, and international reserves were strong, the exchange rate remained stable.

However, the COVID-19 pandemic, the Russia-Ukraine war, the banking-sector crisis, excess-capacity energy payments, and the lack of access to international capital markets weakened the economy, resulting in a depreciated exchange rate.

Dr. Bawumia also compared the strength of the Cedi against the dollar under the Akufo-Addo administration with its value during the National Democratic Congress (NDC) government’s tenure.

He noted that despite global economic challenges, the Cedi’s depreciation has been effectively managed, particularly when compared to the NDC administration.

Using averages to measure progress, Dr. Bawumia stated that between 2009-2016, the cedi depreciated cumulatively by 71.1%, whereas between 2017 and 2023, the cumulative depreciation was 64.6%. This, according to him, demonstrates that the depreciation of the cedi has been lower under the NPP government, despite enduring severe global shocks. Oo