- BoG assures adequate dollars to meet foreign exchange needs.
- Recent pressures in forex market due to government arrears payments and higher imports.
- Cedi depreciates by 14.6% against dollar as of May 22, 2024.
- BoG's improved reserve position backed by strong gold levels.
The Bank of Ghana (BoG) has announced that it has sufficient foreign exchange reserves to meet the country’s needs. The cedi has been under pressure in recent weeks, with an exchange rate of over GH¢14.0 to the US dollar.
Dr. Ernest Addison, Governor of the BoG, made this statement after the 118th regular meeting of the Monetary Policy Committee (MPC) in Accra. He urged individuals involved in speculative dollar purchases to cease their activities, assuring that the BoG is committed to maintaining exchange rate stability for the cedi.
Despite concerns about global and domestic economic uncertainties, the MPC decided to keep the policy rate unchanged at 29%. Dr. Addison emphasized that the bank has adequate foreign exchange reserves to support the market and cautioned economic agents against speculative purchases, warning of potential economic losses when corrections occur.
The BoG has added over $600 million to its foreign exchange reserves in the first five months of the year, and its improved reserve position is supported by strong liquid monetary gold levels of over 26.6 tonnes (estimated at $2.1 billion). This is a result of the successful domestic gold purchase program.
Dr. Addison attributed the recent exchange rate pressures to a weakening current account surplus due to increased import demand and lower export revenue, particularly a sharp decline in cocoa export earnings. The foreign exchange market is also affected by robust public spending on Independent Power Producers’ arrears payment and capital expenditure outlays.
Additionally, Dr. Addison noted indications of increased pressure from importers diverting foreign exchange demand requirements into informal markets, leading to speculative demand for foreign exchange. To address this, the BoG is taking measures to improve market conduct and instill sanity in the foreign exchange market.
The bank has collaborated with the Ghana Association of Banks to streamline documentation requirements for foreign payments, minimizing incentives to resort to informal markets . In recent weeks, the bank has directly absorbed foreign exchange needs of some corporate institutions, reducing pipeline demand for foreign exchange from commercial banks.
The BoG is aware of illegal operators in the foreign exchange market and is working with the Financial Intelligence Centre to sanitize the market . Foreign exchange bureau monitoring will be stepped up to ensure compliance with regulatory frameworks.
All foreign exchange bureaus advertising rates outside their premises and on social media platforms must immediately cease this practice . The bank has established a task force to monitor all foreign exchange bureaus and ensure compliance.
Dr. Addison emphasized that the foreign exchange market is also affected by sentiments and pronouncements made during this election year, urging all to manage pronouncements that weaken confidence in the local economy.
