The Ghana Union of Traders Association (GUTA) has bemoaned the severe financial challenges confronting the business community.
According to the Head of the Business and Economic Bureau at GUTA, Charles Kusi Appiah Kubi, businesses in Ghana have experienced a drastic reduction in their working capital.
He said this has accounted for a loss of over 56% in just six months due to the deteriorating economic climate.
According to him, the rapid depreciation of the cedi has significantly contributed to this capital depletion.
“Within six months, businesses have lost over 56% of their working capital without doing any other business. It is not that they ran into a bad deal, but it is because of the current economic situation.
“So the first thing that affects us when the Cedi depreciates is capital depletion,” he said on June 5.
Mr. Appiah Kubi noted that the weakening currency also drives up the Cost, Insurance, and Freight (CIF) values at the ports.
These costs, he believed, would drive up the price of the product or commodity that the businesses are trading in.
“As businesses, there is a limit to the costs we can absorb. Beyond that limit, it must be passed to the consumer,” he noted.
The cedi continued to give grounds to the US dollar with the year-to-date depreciation at 17.88%. It is presently going for GH¢14.80 to a dollar on the retail forex market.
He noted that this situation has left a financial strain extending to businesses’ ability to meet their financial obligations.
“Right now, there is economic stagnation. This is when people are no longer buying, and as a business, when you are not making sales, how do we then retire our loans?” he questioned.
On inflation, he noted that the economy has become stagnant since consumers are cutting back on spending and businesses are experiencing a sharp decline in sales.
“The moment inflation goes that high, the purchasing power of the consumer also starts diminishing. So, as a business, we’d pass on the cost, but the consumer doesn’t have the purchasing power to absorb the extra cost, so they are not buying. So right now, there is economic stagnation,” he opined in an interview on Joy News.