BoG sets up task force
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BoG sets up task force

In an attempt to save the local currency from further decline, the Bank of Ghana (BoG) has set up a task force to monitor all the foreign exchange bureaux to ensure compliance with the regulations of the central bank.

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Forex Bureaux that are found to flout any of the regulations risk severe sanctions, which may include the revocation of its licence to operate in the forex market.

This was announced by the Governor of the Bank of Ghana, Dr Ernest Addison, at the 118th Monetary Policy Committee press conference. After experiencing relative stability since last year, the Ghana Cedi appears to be losing ground to other major foreign currencies depreciating by 14.6% against the US dollar this year.

To help address this, the Ministry of Finance has announced that it intends to intensify its gold for oil and the BoG’s gold for reserves programme; and also expects a total of $2.3 billion before the end of the year from development partners and the cocoa syndicated loan to shore up the country’s reserves.

Illegal operators

Addressing the media at the MPC press conference, Dr Addison said the central bank was fully aware of the operations of illegal operators in the foreign exchange market and was working with the Financial Intelligence Centre to sanitise the market.

He said Foreign exchange bureaux monitoring would be stepped up to ensure compliance with their regulatory framework. In line with this, all foreign exchange bureaux advertising rates outside their premises and on social media platforms must immediately desist from the practice.

“The bank has set up a task force to monitor all the foreign exchange bureaux to ensure compliance,” he stated.

Dr Addison said the BoG was working together with the Ghana Association of Banks to streamline documentation requirements for foreign payments to minimise the incentives to resort to the informal markets.

To deal with the high demand pressures on the foreign exchange market, he said the BoG had taken steps in the past few weeks to directly absorb the foreign exchange needs of some corporate institutions, and this had led to a reduced pipeline demand for foreign exchange from the commercial banks.

The Governor, however, noted that the foreign exchange market was also affected by sentiments and pronouncements made in this election year and, therefore, urged all stakeholders to manage pronouncements, which had weakened confidence in the local economy.

Macroeconomic conditions

On the general macroeconomic conditions, Dr Addison said the MPC was of the view that while the implementation of policies—at the macro and structural reform level — are consistent and aligned well with the tenets of the IMF-supported programme, there was the need to ensure that the recent depreciation of the currency did not become embedded into the pricing behaviour of businesses and on inflation expectations.

He said the strong reserve build-up of about US$2 billion since the beginning of the IMF programme, the strong disinflation process, significant progress on fiscal policy consolidation, positive current account balances, and the good progress on the external debt restructuring process, have all worked together to deliver enough buffers to support the exchange rate.

On the committee’s decision to maintain the policy rate at 29%, he said the latest forecast showed a slightly elevated inflation profile on account of recent exchange rate pressures and adjustments in transportation fares.

“However, the projections show that inflation will remain within the monetary policy consultation clause of 13-17 per cent at the end of the year. These forecasts are contingent on sustaining the tight monetary policy stance, including aggressive liquidity management operations,” he said.

Banking sector

Dr Addison said the banking sector indicators pointed to a recovery from the impact of the domestic debt exchange programme, with total assets increasing by 28.8% to GH¢306.8 billion at the end of April 2024, driven by domestic currency deposits and other funding sources.

He said banks also reported higher profits for the first four months of 2024, relative to the same comparative period in 2023.“Key financial soundness indicators generally improved during the review period. The capital adequacy ratio adjusted for reliefs increased to 15.5% in April 2024 from 14.7% in April 2023, reflecting the rebound in profits.

“Capital adequacy ratio without relief for the banking system was 11.5% at the end of April 2024, compared to 7.6% in April 2023,” he stated. 

He said liquidity and efficiency indicators also improved in April 2024, compared to the same period last year.

The non-performing loan ratio, on the other hand, increased to 25.7% in April 2024 from 18% in April 2023, due to the lagged effect of the COVID-19 pandemic and the economic crisis of 2022, which has led to the downgrading of several large exposures of banks. 

Dr Addison said the sector was expected to be further strengthened as banks recapitalise and enforce stringent credit underwriting standards.

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