BANKS have called for stringent
measures to curtail access to foreign currencies (forex) in the country.
They
said the easy access to forex, particularly the US dollar, through the informal
sector was making it easier for people and institutions to hoard those
currencies with the least sign of economic uncertainty.
The
Chief Executive Officer of the Ghana Bankers Association (GAB), Mr John Awuah,
said this created artificial demand for forex, leading to the perennial
depreciation of the local currency.
Mr Awuah has, therefore, appealed to
the Bank of Ghana (BoG) and the government to tighten control on access to
forex and its discourage savings to help bolster the cedi’s fortunes.
“Until
the fight against illegal change of money from cedi to US dollar and vice versa
is broken down and the few that will remain are abiding strictly by the Foreign
Exchange Act, we cannot win this fight to strengthen the cedi,” he said.
Mr Awuah was speaking to the Graphic
Business last Monday on the impact of the central bank’s current tight policy
stance in mopping up excess liquidity to mute inflationary pressures and
strengthen the cedi.
At
an emergency Monetary Policy Committee (MPC) on August 17, the bank raised the
policy rate from 19 per cent to 22 per cent and also announced the phased
increment of the cash reserve ratio from 12 per cent to 15 per cent.
The
central bank said the measures were needed to reduce money in circulation and
spur up demand for cedi assets to help douse inflation, strengthen the cedi and
raise demand for domestic bonds.
The
cedi has come under intense pressure this year, resulting in it losing about 25
per cent of its value to the US dollar as of mid-August.
The
steep depreciation also fueled prices pressures, resulting in inflation peaking
at 31.7 per cent in July.
Insufficient measures
Commenting
on the development during the interview, the GAB CEO said he found the policy
decisions to be insufficient in dealing with the current causes of the
depreciation.
He
said the excess liquidity that the central bank aimed to curb was either
unrealistic or caused by activities in the informal sector, otherwise called
‘black market.’
“I
am not sure that banks have excess liquidity in the system.
“In the last two or three auctions
that the government conducted, it was not able to raise the required amount.
“I
am not sure if there was excess liquidity in the banks, the auctions would have
failed,” he said.
“There
maybe excess liquidity but that may exist in the informal sector.
“It may be with people who are putting
money under their beds and speculating on the currency,” he said.
According
to him, although informal sector activities were supposed to terminate in the
formal banking sector, it did not necessarily happen that way.
Avenue to speculate
Mr
Awuah said the issue of currency depreciation would continue to haunt the
country for as long as there was an avenue to speculate on the currency.
That
avenue, he said was fuelled by transactions in the informal sector, including
the sprawling ‘black market’ for forex trading.
The
GAB CEO defined the ‘black market’ to include the operations of forex bureau
and one-man forex traders, mostly at Tip Toe Lane, Tudu, Mamobi and Osu in the
Greater Accra and Alabar, Abuabo and parts of Adum in the Ashanti Region.
Way forward
Mr
Awuah said unlike the banking sector where access to forex was restricted,
documented and mostly backed by real demand, the same could not be said about
the informal sector where patrons hardly provided identification documents and
reasons for requesting the forex.
“Banks
give US dollars out only for reasons that are justifiable; either you are
travelling, buying something or sending to someone abroad.
“Forex
bureaux do not do that in fact, as we speak, no forex bureau can access $2
million from the bank but I am sure that if you go to the ‘black market,’ you
will get that amount and even more,” he said.
“Where
are they getting those funds from,” he asked and further called for stricter
measures to curtail inflows into the informal sector.
Source: Graphic Online