The Bank of Ghana (BoG) says it will crack the whip on recalcitrant forex bureau operators who fail to comply with the laws governing forex trading in the country.
The clampdown, which will start by the end of the year, forms part of a major exercise to help stabilise the local currency which has been one of the many issues bothering individuals and businesses in the country.
The Head of Research at BoG, Mr Philip Abradu-Otoo, announced this at the GRAPHIC BUSINESS/Stanbic Bank Breakfast Meeting in Accra on Tuesday .
“What we intend doing after the banking sector reforms is to move on to the forex bureau market and bring some sanity in its operations,” he said.
The announcement by the central bank comes at a time concerns are rising about the sprawling black market operators in the forex market, a phenomenon which does not allow the central bank to have a firm grip on the record of forex transactions in the market.
“We expect the forex bureaux to do more. We expect them to get the right documentation of people who come to their bureaux because there is a law which requires that,” he noted.
“Some of them are operating in line with our expectation but there are still some lapses and the BoG will crack the whip to ensure they do the right things in conformity with the law,” Mr Abradu-Otoo added.
Confidence in cedi stabilisation
Mr Abradu-Otoo also noted that the central bank was confident the cedi would continue to hold its value for the remainder of the year.
“I am confident because the managers of the economy are working hard to sustain the macroeconomic gains that have been achieved so far. We expect inflation to further drop, and the current account balances to also continue to narrow. We also expect that our fiscal deficit will be contained this year and all of these should support a stable currency going forward,” he explained.
Mr Abradu-Otoo said the BoG had also in the past eight months introduced new conduct guidelines to help market operations.
“In that respect, what we have done with the commercial banks is to try and bring their practices more in line with international best practices. We are overhauling the way forex trading is done and so far the banks are cooperating well,” he pointed out.
A professor of Economics at the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, for his part, encouraged the BoG to enforce the rules governing forex trade in the country and also align them with best practices.
He, however, warned that the enforcement needed to be done carefully to avert any negative impact.
He said in 2014 when there was an attempt to enforce some of the regulations, it did not work because the perception was that the government was trying to control the foreign exchange market, so the market operators reacted and it did not favour the economy, as the currency suffered one of its major losses that year.
“We, therefore, have to do it more carefully now,” he stated.
“We should be able to track demand and this is one area we have failed in. People just walk into forex bureaux and change their monies. If you go to other countries, you cannot change money without your passport and we need to enforce same measures here,” he emphasised.
The Governor of the BoG, Dr Ernest Addison, in his keynote address, said the theme for the breakfast meeting which was: “Achieving sustainable exchange rate stability: our option”, was very timely, and came at a time when the country had successfully emerged from the recent volatilities in its exchange rate.
He said there was the need to understand that the exchange rate was only a price and within that context as with all prices of goods and services, the exchange rate would respond to the dynamics of the economy and would also be subject to the dynamics of demand and supply.
Looking at history, he said, the flexible exchange rate regime which was being practised in Ghana had served the country well, given the structural characteristics of the economy.
Strong policy reforms
Dr Addison also pointed out that the strong policy reforms introduced in the last 24 months such as the fiscal consolidation, a complementary monetary policy stance and the financial sector reforms, were yielding the needed results.
“We have seen an improvement in the Gross Domestic Product (GDP), a drop in inflation rate, the halving of fiscal deficit and a very strong external payment position.
“Our export performance over this period has also meant that we were able to build reserves to the tune of $7.6 billion in 2017, representing 4.4 months of import cover. Lately, our reserves have moved to $9.9 billion, representing 5.5 months of import cover, following the recent sovereign bond issuance,” he explained.