Ditching the Dollar: GUTA president calls for use of Chinese Yuan in trading
President of the Ghana Union of Traders (GUTA), Dr. Joseph Obeng, has called for the fast-tracking of measures to ensure that Ghanaian traders are able to trade more in the Chinese Yuan when doing business with China.
He noted that the move is expected to reduce pressure on the Cedi because imports will not be done with US dollars.
Ghana’s imports is mostly coming from China because of cheaper cost when compared to similar local goods.
Making the assertion in an interview, he said, “even the central bank has accepted the move of trading with China using the Yuan.”
“They are talking around that. Some banks have that initiative across, so it is the sure way to go,” Dr. Obeng added.
Dr. Obeng indicated that Ghana could explore a clearing system with China similar to the Pan-African Payment and Settlement System.
“We can also do a similar clearing system with China where we send our local currency to the local banks, and they have a clearing system with the Chinese banks where they clear with the local currencies.”
“I think this is the way forward, and central banks in Africa have started thinking in that manner. I think they have to fast track those initiatives that will lessen the pressure on the US dollar,” Dr. Obeng said.
Currently, the Cedi is trading at GHS 6.88 to the dollar, up from about GHS 5.58 in the first quarter of 2021.
Meanwhile, the Bank of Ghana has been urged to increase interest rates in the country to help stop the free fall of the Ghana cedi.
According to the Chief Finance Officer of the Valley View University, Dr. Williams Peprah, increasing interest yield will entice investors to purchase more government securities and help slowdown the depreciation of the cedi, despite the difficulty it will bring to the economy.
“When a country’s currency is suffering from devaluation, as we have experienced in Ghana in the first 2 months of the year, where we have the worst performing currency, the only alternative to stop the devaluation is from increasing interest rates in the country”.
“What it means is that instead of investors or citizenry not having confidence in the currency but to purchase dollars or foreign currency for savings, government will entice them with an increase in interest rates; so that they will purchase government bonds and government securities”, Dr. Peprah pointed out.
To him, it is a strategic move to save the cedi and “this is known interest rate parity”.
Already, interest rates have been going up as yield on the 91-day bill crossed the 13% mark for the first time since 2017.
Dr. Peprah said increasing interest rates at this time is inevitable to save the cedi from further depreciation, adding “Ditching the Dollar: GUTA president calls for use of Chinese Yuan in trading
However, he said “the implication is that cost of living, or cost of borrowing will become expensive in the country, and it will slow down the economy for a while, but this is in the best interest to control the wide spread of margin between the forex market and the Bank of Ghana’s exchange rate”.
The local currency begun the year trading at about ¢6.40 to the dollar but with just two months of the year it is going for ¢7.15.
