The attainment of macroeconomic stability remains the central focus for a government since time in antiquity. A lack of macroeconomic stability haunts governments to the core.
Ghana, with its 27 million population, has an outlook that suggests that it can be stronger than ever before. Jobs and economic growth have been the mantra of an incumbent’s re-election campaign and as always the economy has always been the most important topic of debate during elections The situation was no different in 2016. However, Ghana is currently grappling with a serious youth unemployment problem. The entire major political parties have offered varying policy proposals to help tackle the menace.
According to the Ghana Statistical Service Department, 86.1% of employment resides with the informal sector.This means that only about 13.9% gets employment with the formal sector (public & private put together). So then, the question is, where does the chunk percentage of 86.1 go? What exactly do they do? What are their contributions to the national development? These buggering questions lead the inquest into the skeletal anatomy of what is known in some circles as the “underground economy”.
Ghana’s informal sector is made up of small artisanal enterprises, peasant proprietors, agricultural laborers, distribution agents, transport owners, porters, Forex operators, repairers et al. This is an area where there is less government monitoring and also with a high propensity to tax evasion. In spite of these, it has provided a good avenue for the majority of Ghanaians to escape poverty.
Often times it has been referred as an engine of growth. It’s thus imperative that government decentralizes efforts at harmonizing its operation in line with its macroeconomic policies. Anything short of this has the tendency of displacing government’s efforts of leveraging its macro economic targets even as the sector has become so charged-up and booming.
Now, this is the skeletal anatomy of this “shaded” hemisphere. Ghana is import dependent — talk of raw materials, finished consumables, and semi-raw materials et al. Between 2003 to 2016, the average import was 2647.22 million USD. This came with an accompanying foreign exchange regime where the local Ghana cedi seems to have taken a perpetual bow to the dollar. What this means is that the consumer goods which are mostly preferred have become very expensive. The effect is that it lowered the purchasing power of households; cost of living became high and standard of living poor.
Ghana is one of the countries in the sub-Saharan where over the counter transaction “black market” is ever so booming. With the aid of trade liberalization and internet banking revolution, movement of funds across borders have seen its unprecedented leap and with the aid and network of the agents in the black market, it is much easier for traders and medium-sized merchants in (spare parts, new parts, clothing, equipment, construction, and machinery), to make payments to clients in China, Dubai, South Korea, Taiwan, India, North America and some parts of Europe faster and easier than the traditional universal banks.
What is not in the know for the Government/The Central Bank is the exact volume of a transaction within a period.
In early 2017 when a mild recession had hit the Nigerian economy where the Nigerian Naira rises and falls against the US dollar in about six times in a day, it became much more efficient for smart Nigerian businessmen to buy the Ghanaian cedi and in turn the US dollar for foreign transaction or in simple terms, most smart Nigerian businessmen have sought to be channeling their foreign transaction through Ghana.
It is surprising to know that millions of dollars are transacted through this “underground superhighway” on daily basis and at frequent periods.
it is thus not surprising that the cedi continues to depreciate against the US dollar in record times even though it can’t be said to be solely responsible for the woes of the cedi.
Moving forward, the Bank of Ghana should be able to measure the volume, volatility of this sector and duly factor it into its broader spectrum of macroeconomic management. Anything short of this will have a very debilitating multiplier effect on households.