The Bank of Ghana (BoG) has introduced a new methodology for computing its Foreign Exchange (FX) Market Reference Rate (MRR), aligning with international best practices to ensure accurate market reflection. This change aims to broaden data coverage, capturing daily transactions between commercial banks and clients, as stated by the BoG.
The new methodology is the first step in the BoG’s long-term strategy to align its MRR with the International Organization of Securities Commissions (IOSCO) Principles of Financial Benchmarks. This move demonstrates the BoG’s commitment to transparency and reliability in Ghana’s foreign exchange market.
To compute the reference rate, all banks will submit data on spot US$/GH¢ transactions concluded before 3:30 pm each working day. This data will encompass interbank market transactions and client transactions valued at US$10,000 or more, reflecting prevailing market conditions.
The submitted data will be used to calculate the weighted median exchange rate, which will be published on the Bank of Ghana website as the closing rate for the day’s transactions. This approach ensures that the reference rate accurately represents market developments.
The BoG’s decision to update its methodology is a significant step towards enhancing the credibility of Ghana’s foreign exchange market. By adopting international best practices, the BoG aims to promote investor confidence and stability in the market.
The International Organization of Securities Commissions (IOSCO) Principles of Financial Benchmarks provide a framework for ensuring the integrity and reliability of financial benchmarks. By aligning its MRR methodology with these principles, the BoG demonstrates its commitment to global standards.
The new methodology will provide a more comprehensive picture of Ghana’s foreign exchange market, enabling better decision-making for stakeholders. As the central bank, the BoG plays a critical role in maintaining market stability and promoting economic growth.
The Bank of Ghana’s website will continue to publish daily interbank FX rates, providing transparency and accessibility to market data. Historical exchange rates are also available, offering valuable insights into market trends.
The BoG’s guidelines for foreign exchange allocation and forward auctions will remain crucial in governing market activities. These guidelines ensure that foreign exchange transactions are conducted efficiently and transparently.
By introducing this new methodology, the Bank of Ghana reaffirms its commitment to maintaining a stable and credible foreign exchange market, aligned with international best practices.
