Cedi depreciation erodes 56% of working capital of businesses
Ghanaian businesses have experienced a dramatic reduction in working capital, with losses exceeding 56% in just six months due to a worsening economic climate says Charles Kusi Appiah Kubi, Head of the Business and Economic Bureau at the Ghana Union of Traders Association (GUTA).
According to him, the rapid depreciation of the Cedi has been a primary driver of capital erosion of businesses.
“Businesses have lost over 56% of their working capital within six months without engaging in any new business activities,” Mr Kubi remarked, further asserting that the Cedi’s declining value diminishes the purchasing power of capital and hampers business operations.
The weakening Cedi, he also noted, has increased the Cost, Insurance, and Freight (CIF) values at the ports, escalating operational costs and forcing businesses to pass these rising costs onto consumers, who are already grappling with high inflation.
Inflation has significantly eroded consumer purchasing power, creating a challenging environment for businesses.
“With inflation high, consumers’ purchasing power diminishes. Businesses must pass on costs, but consumers cannot absorb these extra expenses, leading to a decline in sales. People are no longer buying, and as a business, when you are not making sales, how do you retire your loans?” Mr Kubi quizzed.
This situation, he asserts, has resulted in economic stagnation, with reduced consumer spending and increased financial strain on businesses.
Stabilizing the Cedi and implementing measures to control inflation and reduce port costs by the Government are crucial and could provide the much-needed relief.
Without significant intervention from the Government, the outlook for businesses in Ghana remains bleak, hence the urgent need for comprehensive economic stabilization measures.
