The Bank of Ghana (BoG) is confident of boosting its reserves by half a billion US dollars from miners, oil and gas-producing firms and other major exporters between now and December.
The purchases are to accrue from a new arrangement that allows the
central bank to pay cedis for foreign exchange (forex) that have been
repatriated by the exporters.
Already, the bank purchased US$20 million from one mining firm
last week in a positive start to the new programme that seeks to bolster BoG’s
reserves in the midst of rising demand and a depreciating cedi that is
attributable to weak buffers.
The Director of the
Research Department of the bank, Dr Philip Abradu-Otoo, told the Graphic
Business on August 27 that BoG also received commitments worth more than US$120
million from other mining companies in the programme’s first week.
He said the purchase and the pledges brightened the bank’s
optimism that the programme would successfully bolster the central bank’s
reserve position.
Basis
The central bank needs a
swell of hard currencies to fund imports and meet foreign debt repayment and
amortisation obligations after limited inflows stretched the reserves to a
record low, further exposing the cedi to one of its worst year-to-date depreciations
since 2015.
Net reserves fell by more than half to US$3.58 billion in June
this year from US$7.94 billion the same period last year.
It followed a dry-up in flows from the traditional Eurobonds
although demand continued to soar.
To help shore up the reserves and contain the cedi depreciation,
BoG announced on August 17 after its emergency Monetary Policy Committee (MPC)
meeting that it would purchase all forex arising from the voluntary
repatriation of export proceeds from mining and oil and gas companies.
“This will strengthen the central bank’s forex auctions,” the bank
said.
BoG data show that gold
exports fetch an average of US$3.5 billion annually, of which the companies
voluntarily repatriate about 75 per cent.
Data from the Ghana Chamber of Mines (GCM), however, show that
mineral exports bring in an average of US$5 billion per annum, of which gold is
the lead earner.
Call to action
The Chief Executive Officer (CEO) of the chamber, Sulemanu Koney,
said a policy guide from BoG showed that the central bank wanted to buy a
portion of the voluntarily repatriated earning.
Dr Koney told the Graphic
Business on August 25 that members saw the programme to be a national call to
action and were ready to help make it a success.
“In difficult situations like this, responsible institutions rise
up and help their nations.
“In the spirit of this, we asked our members to see how they could
help,” the CEO of the advocacy body for the large-scale mining firms said.
“The response from our
members has been positive. One company has actually sold US$20 million to the
central bank and another big firm has said that its parent company has given
the go-ahead for all their earnings for this year to be sold to the central
bank,” he added.
Arm’s length
Dr Koney, however, said miners would participate in the
transaction at arm’s length and conscious of the need to prudently balance
their forex and cedi floats against real demand.
The oil-producing companies were not readily available for
comment.
Change in tactics
Until the latest policy, exporters, including the extractive
companies, were allowed to sell their inflows to the banks for the lenders to
report to the central bank.
It is understood that that arrangement was supported by the
International Monetary Fund (IMF) to help encourage transparency and price
discovery in the exchange market.
Dr Koney of the Chamber of Mines said the current arrangement
allowed miners to sell to either the central bank or the commercial banks.
He, however, explained that peculiarity of BoG’s need for forex
meant that his outfit would prioritise demands of the regulator over the
lenders.
He dismissed suggestions that the central bank was offering higher
rates, noting that the mining companies “are not in this to profit”.
“Forex trading is not our core business and none of us sees this
as an avenue to make money; we see it as an opportunity to support and
stabilise the situation,” Mr Koney said.
He confirmed that BoG had agreed to use the Bloomberg rate in
settling the demands, adding that that rate was lower than the rates that
commercial banks often offered.
Source: Graphic Online