Crunch Cabinet meeting on forex today
Cabinet will today discuss the new foreign exchange (forex) regulations announced by the Bank of Ghana last Wednesday.
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The Bank of Ghana notices announced measures to arrest the declining value of the cedi, a development which has caused some uneasiness in the business community.
While some analysts have welcomed the measures and challenged the Bank of Ghana to ensure strict enforcement, others say the measures are unfair to businesses and will boost the illegal currency market, referred to as black market.
There is, however, a general agreement as noted by the Trades Union Congress (TUC) that there is excessive dollarisation of the economy.
The Governor of the Bank of Ghana will present a brief on the measures and the central bank’s enforcement plans to the Cabinet.
Ministry of Finance sources told the Daily Graphic that the Central Bank Governor and his team would then hold discussions with the Cabinet on public concerns arising from the implementation of the measures.
Minister/Governor meet bank officials
Later in the day, the Minister for Finance, Mr Seth Terkper, and the Governor of the Bank of Ghana, Dr William Wampah, will meet with chief executives of the commercial banks to discuss implementation and bring further clarity to the announced measures.
Emerging market currencies have been under pressure since the American Federal Reserve commenced the implementation of its policy of “tapering” the bail-out/stimulus packages implemented at the height of the world financial crisis.
Many central banks have increased their prime rates to mop up excess liquidity and are taking other measures to protect their economies.
The Argentine peso took a particularly big hit two weeks ago when it dropped 12 per cent in one single day.
Other currencies fall
In a related development many emerging-market currencies are falling against the dollar.
Since January 22, this year, the Argentine peso has fallen by 14 per cent.
It may be the most dramatic plunge among emerging-market currencies in recent days, but it is hardly alone.
From Turkey to South Africa to India, the currencies have been weakening against the American dollar.
Most have shed between 10 and 20 per cent of their value since May, 2013 when Ben Bernanke, the outgoing Chairman of American Federal Reserve, uttered the word "tapering", the code for reducing America’s bond-buying under quantitative easing.
Each market has specific worries. South Africa and Turkey have gaping current-account deficits. Ukraine and Thailand are riven by political protests. Brazil is vulnerable to China’s slowdown. Argentina is running out of international reserves with which to prop up the peso. But when markets start falling, contagion is always a worry.