The Bank of Ghana (BoG) has initiated a hedging programme aimed at protecting the country’s international reserves and insulating the economy from external shocks, particularly from drop in commodity prices.
The Governor of the BoG, Dr Johnson Pandit Asiama, who disclosed this at a press conference in Accra on Wednesday following the 125th regular meeting of the Monetary Policy Committee (MPC), said the programme was part of broader measures to safeguard the economy from destabilising global price fluctuations.
“This is one of the ways to protect the economy against destabilising commodity price shocks,” he stated in response to a question on what the central bank was doing to insulate the economy. Ghana’s reserves which currently stand at over $11.1 billion, enough to cover 4.8 months of imports.
The Governor added that the economy remained vulnerable to swings in commodity prices due to its heavy dependence on exports of gold, cocoa, and crude oil.
“Yes, we are heavily exposed to movements in commodity prices. Any sharp price drops could impact our international reserves. That is why we are starting the hedging programme,” Dr Asiama said.
He explained that beyond hedging, long-term structural measures such as increasing the level of processing of export commodities and diversifying the export base were essential to reducing Ghana’s exposure to global price volatility.
Meanwhile, the MPC, by a majority decision, reduced the policy rate by 300 basis points to 25 per cent from 28 per cent, the largest cut in the central bank’s history.
“This is the largest cut we have had,” Dr Asiama noted, adding that “The disinflation we have seen in the last five months is probably also the sharpest in the history of the Bank of Ghana.”
Addressing concerns about the black market for foreign exchange, the Governor described the parallel market as illegal, warning that only licensed forex bureaux were permitted to deal in foreign currency.
“The black market is illegal. Only the licensed forex bureaus are allowed to deal in the buying and selling of foreign currency,” he emphasised.
He, however, admitted that the black market had persisted due to macroeconomic challenges and lapses in enforcement.
“You cannot go into their bedrooms to take them out. But once we do what we have to do, we believe their activities will be minimised,” the Governor stated.
Dr Asiama said the BoG was taking steps to strengthen the interbank and forex bureau markets, which he described as the legitimate and dominant channels for foreign exchange transactions.
“We issued a notice to improve supply and inflows. Once these begin to yield fruit, we will see some stability,” he said.
On the issue of forex liquidity, he noted that the BoG supported banks daily through credits to their Nostro accounts, adding that the central bank monitored how those funds were used.
“We make sure that whatever support we give to the banks is used for the purposes indicated in their requests. There’s always room for improvement, and we are doing just that,” he added.
BY KINGSLEY ASARE