The Cedis’ depreciation is taking a heavy toll on the operations of lot of businesses in the country. The latest are firms that import petroleum products into the country.
According to the Chamber of Bulk Oil Distributors (CBDCs), the development has made it difficult to secure new credits from banks to fund its imports.
Some banks have even cut credit lines to them, say importers of the commodity.
This is because most of the banks are not satisfied with the dollar rate government buys the products from distributors.
Chief Executive of the Chamber, Senyo Hosi, told Joy Business, this could result in serious shortages in petroleum products in the coming weeks.
“If [banks] in the country would not be allowed to contractually engage BDCs operate at their own FX rates or rates that are more reasonable and they are going to have government still set the FX rates in the price build up, rates which they [banks] may consider uncomfortable, they are not likely to fund us”, said Mr Hosi.
He added the cedi volatility makes the prospect of funding BDCs a difficult task for creditors, especially when the forex rates are regulated by the government.
Meanwhile, the current total debts owed the Chamber of Bulk Oil Distributors by government has hit 2 billion Ghana cedis.
Also, checks by Joy Business indicate that, government has spent some 20 million Ghana cedis in attempts to cushion consumers from paying the actual price of petroleum products at the pumps.
According to the chamber, the decision to subsidise or not is the sole preserve of Government.
It must, however, have the capacity to budget appropriately and fund them timeously.
Nonetheless, the review of the 2015 budget which allotted 50 million Ghana cedis only to petroleum subsidies, as well as the Minister of Finance’s suggestion that no further FX under-recovery will be entertained suggest Government lacks the commitment or capacity to sustain subsidies on petroleum products.
With about 2 billion Ghana cedis owed to BDCs for 2013 and 2014 FX under-recoveries as well as the cost of bearing price under recoveries, importers of petroleum products are concerned that Government will pursue a policy to compound the debt.
“We are concerned that this will dampen the funding confidence to the industry”, said Hosi.
The CBOD has always maintained that the pursuit of subsidies as a social intervention is mostly misplaced or ill-targeted.
The pursuit of mass transportation and the facilitation of refinery investments will better mitigate the impact of petroleum pricing on the ordinary citizen.
BDCs incur losses because Government more often than not delays in paying the importer who have to pre-finance these subsidies.
BDCs end up having to pay extra interest on facilities from the Commercial Banks who fund their activities.
This creates a very adverse effect on banks, their capital, and consequently the wider financial system in the country.
In the long run, the consumer who enjoys the subsidy ends up paying even more in taxes in order for the government to generate extra revenue to pay these debts and a disruption in economic activity and growth.
In a related development, government says a lot is being done on the fiscal side to complement efforts by the Bank of Ghana to stabilize the local currency.
The Ghana cedi has depreciated by a little over 10% against the dollar from January. A dollar currently sells at 3 Ghana cedis, 76 pessewas at forex bureaus.
However, Deputy Minister of Finance, Mona Quartey, told Joy Business government committed to halting the cedi fall.