Banks, forex bureau to check cedi depreciation

October 26, 2022 / Comments (0)

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The leadership of universal banks in the country and the Association of Forex Bureau Operators have agreed to work in close collaboration to stem the rapid depreciation of the Ghana cedi.

This comes on the heels of a high-profile meeting between the Bank of Ghana (BoG), the leadership of universal banks and the Association of Forex Bureau Operators in Accra on Tuesday, October 24, 2022.

The meeting, the first of a series of engagements, brought together stakeholders within the foreign exchange market to deliberate on how to streamline, sanitise and provide clarity on the supply of forex in the country.

Supply-demand imbalances

In his opening remarks, the Governor of the BoG, Dr Ernest Addison, acknowledged that though the global economic meltdown occasioned by the geo-political tension between Russia and Ukraine had caused supply-demand imbalances in several commodity markets, high inflation, high-cost of living and high uncertainties in financial markets, the BoG was poised to work with relevant stakeholders to stabilise the foreign exchange market and help contain the fall in value of the cedi.

“Available data indicate that we started the year GH¢6 to the dollar. It got to GH¢7 and we stayed at GH¢7 in June, GH¢7.6 in July, GH¢8 in August, GH¢9.6 in September and now it is GH¢12.5. But we are here again with people sending messages that the dollar-cedi rate is GH¢15 to a dollar.

“Clearly, this type of movement does not deflect changes in the fundamentals. It is clear that the market is not functioning properly. We are seeing speculations taking over under very disorderly market conditions and it appears now the black market is rather driving exchange rates. This we cannot allow to continue,” he said.

Present at the meeting were Managing Directors of the GCB Bank PLC, Fidelity Bank, Ecobank, Societe General, Absa, Stanbic Ghana, First National Bank, and Bank of Africa, among others, as well as heads of the Association of Forex Bureau Operators.

Cedi woes

The leadership of the banks blamed the rapid depreciation of the cedi on a wide array of issues.

Most prominently, they attributed it to the uncertainties surrounding the future of Ghanaian bonds.

They said the ongoing discussions between the government and the International Monetary Fund (IMF) for a $3 billion loan facility was increasing speculations over Ghana’s debt sustainability status.

Though the Bretton Woods institution has maintained that any talk of debt restructuring is dependent on an ongoing Debt Sustainability Analysis (DSA), investors, according to the banks, had begun cutting their losses and moving their investments into safe havens, a move that was contributing to the rapid depreciation of the local currency.

Mechanisms

They called on the BoG to employ adequate mechanisms to regularise forex brokers in a way that would ensure their efficient supervision and prevent the sale of foreign currencies at exorbitant prices.

This, Dr Addison assured the leadership that, the BoG was taking steps to restore order in the forex market by making sure the interbank market took full control of the forex market to enforce regulations surrounding forex trading so as to streamline the supply of forex in the country.

Black market

Members of the Association of Forex Bureau Operators commended the Central Bank for its role in clamping down on illegal forex dealers also known as “Black Market” in a move to sanitise the sector and ensure licensed forex operators to deal in exchange transactions.

The Governor charged the association to be law compliant and cautioned them to desist from determining forex rates which had contributed to the speculation of rates, thus creating unnecessary panic in the market, contributing to the rapid depreciation of the local currency.

Mechanisms

They called on the BoG to employ adequate mechanisms to regularise forex brokers in a way that would ensure their efficient supervision and prevent the sale of foreign currencies at exorbitant prices.

Dr Addison assured the leadership that the BoG was taking steps to restore order in the forex market by making sure the interbank market took full control of the forex market to enforce regulations surrounding forex trading so as to streamline the supply of forex in the country.

Black market

Members of the Association of Forex Bureau Operators commended the central bank for its role in clamping down on illegal forex dealers also known as “Black Market” in a move to sanitise the sector and ensure licensed forex operators dealt in exchange transactions.

The Governor charged the association to be law compliant and cautioned them to desist from determining forex rates which had contributed to the speculation of rates, thus creating unnecessary panic in the market.

Source: Graphic Online

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