Accra - Ghana needs to make “fundamental” changes to its economy if it is to protect its currency and allow its markets to continue growing steadily, President John Dramani Mahama said on Tuesday.
West Africa's second-largest economy has attracted international interest in recent years because of its promising oil reserves, relative political stability and high growth rates.
But a weakening currency and concerns that fluctuations in global prices of major export commodities such as gold and cocoa have raised fears of a slow down.
The cedi exchange rate has dropped to a record low, as investors ran shy of emerging markets after the US Federal Reserve scaled back its stimulus programme.
That prompted Ghana's central bank last week to imposed new controls on the movement of foreign currency, including restricting the size of withdrawals.
Mahama told foreign journalists in Accra that the currency's struggles were a sign that it was time to restructure the way Ghana trades.
“One of the visions of this government is to change the structure of the economy and to create more pillars for the economy to stand on so that we don't have a situation where a narrow band of primary commodities that you depend on which are subject to fluctuation on the international market, lose value, and then you have a bust,” he said.
Ghana is the world's second-largest producer of cocoa and Africa's second-largest producer of gold.
Oil production began in 2010 and the country now pumps about 100,000 barrels per-day from offshore fields.
The price of gold, dropped 28 per cent last year, however, adding to pressures from a ballooning deficit and a downgrade of Ghana's outlook and credit rating by international lenders.
New oil money and a buoyant economy has seen the construction of new office blocks and residential high-rises in Accra Ä the price for many of which are quoted in dollars, as at hotels.
But Mahama said that practice had to stop.
“We need to build confidence in the cedi as a currency because that's our currency,” he said.
“All transactions locally should be in cedis and we must think about price of goods and services in cedis.”
As part ot the revamp, investors needed to be encouraged to set up factories and processing plants to refine cocoa, bauxite and other raw materials that Ghana imports in order to increase its value.
“The opportunity exists for Ghana to make a game change and take itself out of this situation where (we) are buffeted by rough winds in a cyclic manner because of the structure of our economy,” he said.
Razia Khan, head of African research for Standard Chartered bank, said the central bank measures would help the cedi in the short-term but the high deficit would eventually put pressure on the cedi to start sliding once again.
“The foreign exchange changes don't pose an existential threat to the Ghanaian economy but if Ghana can't get its debt ratios under control, then that poses a significant threat to the future,” she told AFP.
“If the government is unable to honour its obligation, there's going to be a time when it's going to cut back on debt, on spending” which could harm the country's economic growth.” - Sapa-AFP