This article is in response to one posted by a friend. ‘Abaa fo obi le nane ‘which in Ga (one of the local Ghanaian languages) means, her child’s leg will be amputated. It is a very popular ‘’jama’’ aka parade song in Accra.
The story goes like this: A certain woman had a daughter and a maid servant. They both developed sores on the leg. The woman decided to use hot water and ‘’burning’’ iodine to ‘’mercilessly’’ treat the sore of the maid servant and the softest of hands to treat her daughter’s. If the servant cried, she received slaps and get told to ‘’suck’’ it up. The slightest noise from the daughter and the mum would stop the dressing and put Band-Aid on her sore.
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Schools re-opened, the daughter went to her boarding house, the servant stayed at home and the ‘’merciless’’ and painful treatment of her wound continued. The wound healed. The daughter went to school with heaps of Band-Aid to hide and change the dressing. With time the wound became gangrenous. The school sent for the mum but she sent her oldest son instead. The message from the school was that the girl’s leg needs amputation to save her life.
Abaa fo ebi le nane abaa wontso. Ke otee le yaa kee omami ake abaa fo ebi le nane, abaa wontso. Translated, it means, ‘’her child’s leg will be amputated and will be given a prosthesis. When you go back, tell your mother that her child’s leg will be amputated and will be given prosthesis. The moral of the story is that ‘’harsh’’ treatment of difficult wounds pays. Band-Aid treatment though may seem ‘’cool’’ spells disaster in the long run.
Ghana’s currency is like the wound on the leg. It was the worst performing currency in the world last year. We have 2 options; the servant’s treatment or the daughter’s regimen. The GoG has decided to go the daughter’s way. Instead of treating the fundamentals which led to the collapse of the currency, they have decided to put a Band-Aid on the wound by using our reserves and borrowed money to grossly shore up an indefensible currency.
Every single indicator shows that the economy is in trouble, the value of the currency is the measure of the economy, yet they are blaming speculation for the fall of the cedi. The treatment therefore is to put a Band-Aid on to stop the speculation and all will be fine. Unbelievable!
Some of the fundamentals which lead to appreciation of a currency are listed below.
1. Higher export-led economic growth
2. Increase in interest rate – increase inflow of money because of higher returns on saving
3. Lower inflation
4. Surplus on Current Account – means you are a net lender to the rest of the world
5. Increased competitiveness
6. Expectation – this is where speculation comes in. It depends on all the above. If they are all in the right direction, nobody will speculate otherwise. Speculation is nothing but the level of confidence in the economy.
Any rise in a currency not due to one or more of above factors is just covering the wound with a Band-Aid. I call it BAND-AID ECONOMICS. And as you know, the result is gangrene requiring amputation. I have wondered, why this government is so determined to fail? I think I know the answer now. It appears the opposition cannot take the government on because they really do not have a different economic philosophy. What at all is this?
The bloated size of government cost of governing the State and expansion of foreign missions to non-vital countries were some of the structural challenges with negative impact on the fiscal bottom line this government inherited from the previous one. But the ‘’excellency’’ with which this government has made a bad situation worse is unprecedented.
This government has decided to treat every economic wound like that of the woman’s daughter. The consequences are clear, aren’t they? But Ghana will be saved. Ghana’s leg will not be amputated. ARM will take over and treat the wound ‘’mercilessly’’. ARM will cut the size of government and cost of governing the State by 80%, the whole structure of the economy will change. Afooo Ghana nane, Ghana’s leg will not be amputated.
Tswa omanye aba!