Cedi depreciation: ‘Bawumia learnt nothing at Bank of Ghana’ – Adongo

Member of Parliament for Bolgatanga Central, Isaac Adongo has questioned Vice President, Dr. Mahamudu Bamumia’s understanding of the application of basic economic principles.

According to the legislator, Dr. Bawumia has consistently displayed a lack of understanding of basic economics, and is wondering what the vice president learnt at the nation’s Central Bank, the Bank of Ghana in the close to ten years he worked as deputy governor.

Speaking to host of the Gold Power Drive, Samuel Eshun on Radio Gold Tuesday, the Bolgatanga Central legislator, who is also a financial analyst, further accused the Vice President of consistently peddling falsehood about the state of the economy.

Mr. Adongo said, although the second gentleman of the land is touted as a renowned economist, he has no clue to managing the economy.

His comments follow a recent banter that has ensued between former President John Mahama and Dr. Bawumia on the cedi’s performance against the dollar.

Former President John Mahama recently suggested that the weak economic fundamentals under the leadership of President Akufo-Addo are to blame for the current depreciation of the cedi against the US dollar.

Mr. Mahama posted a short video on Twitter subtly taking a swipe at Vice President Dr. Bawumia over the latter’s criticism some time back on the domestic currency’s depreciation against the US dollars.

In the video, Dr. Bawumia, whiles in opposition, attributed the depreciation of the Cedi to weak economic fundamentals.



He insinuated that the incumbent government was engaged in propaganda with the issue.

But Mr. Mahama in his tweet quoted the current exchange rate of the Cedi to the US dollar and asked, ‘Weak fundamentals?’

His question triggered a response from Dr. Bawumia, saying Mr. Mahama’s suggestion “sadly demonstrate his lack of understanding on key aspects of our economy”.

But Mr. Adongo who is a member of the finance committee of parliament disagrees with Dr. Bawumia’s assertion arguing that “when it comes to finance, rate of change in calculating cedi depreciation is a no go area.”

“Bawumia’s colleagues in banking and investment banking will be laughing at him today for using rate of change to calculate depreciation. Depreciation technically is calculated over one year so we do year-on-year. It is not calculated beyond one year, so by December when we finish the financial year we go back to start year-on-year from January but we don’t have multi-year calculations of depreciation.”

“We normally say in finance that depreciation is not a goal variable, meaning that nobody sets out in the beginning of the year and say that I want to achieve a depreciation of 2% at the end of the year, rather you adjust your depreciation as a shock absorber in the course of managing the economy to reflect the shocks the economy is receiving both from external and internal sources. So a proper currency rate depends on the circumstances in the cause of the year, so you manage your currency to reflect the shocks in the cause of the year,” he explained.

Mr. Adongo added that depreciation should ‘never’ be static as being argued by Dr. Bawumia, noting that a static depreciation will mean a fixed exchange rate regime which does not work in a free market economy like Ghana.

“The Bank of Ghana uses this methodology, Dr. Bawumia you worked there for close to ten years, did you learn this?, did you understand what you were seeing? Did you understand what they were calculating?” Mr Adongo asked.

Mr. Adongo therefore attributed the recent decline of the Cedi to what he called the consistent application of ‘first aid steroids’, that is, the consistent pumping of dollars into the system, which for him cannot be the solution to the problem.

Source: Radiogold905.com