The Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwakye, has said he will not be surprised to see the local currency stabilising in the last 24 days to the general elections due to the deliberate intervention by the Bank of Ghana (BoG).
His comments follow the latest action taken by the BoG on forex trading.
The Bank of Ghana has suspended the Foreign Exchange Trading Licence of Consolidated Bank Ghana (CBG), meaning that CBG can no longer engage in forex activities.
The central bank noted that with effect from 26th November 2024, for a period of one (1) month, in accordance with section 11 (2) of the Foreign Exchange Act, 2006 (Act 723), the Bank can not engage in forex exchange.
“This is as a result of a number of breaches of the foreign exchange market
regulations, Updated Guidelines for Inward Remittance Services for Payment Service Providers dated November 2023 and the Anti-Money Laundering/Combating the Financing of Terrorism & The Proliferation of Weapons of Mass Destruction (AML/CFT&P) Guideline, for Accountable Institutions in Ghana dated December 2022, which have come to the attention of Bank of Ghana,” the Central Bank detailed in a release on November 11, 2024.
However, CBG’s license will be restored at the end of the one-month suspension period once the Bank of Ghana is satisfied that CBG has put in place effective
controls to ensure strict adherence to foreign exchange market regulations.
“By this statement, the Bank of Ghana cautions the foreign exchange market players to adhere strictly to the applicable forex market regulations and
guidelines,” the BoG said.
In a post on his Page, Dr Kwakye who has been an ardent critic fo the central bank over the woes of the Cedi said “It will not be surprising to see the cedi stabilising in the last 24 days to the election due to deliberate BoG intervention. But the question is how sustainable will the stability be?
“Just as some few roads are being patched, the cedi is most likely to see some stability in the last 24 days to the election due to deliberate BoG intervention. But the question is how long the stability will last.”
Earlier, Dr John Kwakye told the government to declare an immediate national emergency to rescue the Cedi.
Dr Kwakye says that the significant cedi appreciation is nearly always unlikely hence the need to pool together all minds.
“The rate of depreciation of the cedi is alarming. We know that cedi significant cedi appreciation is nearly always unlikely. The government or the next government must declare an immediate national emergency to rescue the cedi, pooling together all minds,” he wrote on his X page.
The IEA had disclosed that the cedi has lost about 74% of its value against the dollar over the past 3 years,
The local currency depreciated by 30.0% in 2022 and 27.8% in 2023. It has so far in 2024 lost almost 29% to the American greenback.
According to the IEA, “this is a huge depreciation by all standards”.
It added that the cedi faces further risks for the rest of the year for a number of reasons. The first is election uncertainties that makes the dollar holdings as a safe haven.
The second is uncertainties about the future of the International Monetary Fund programme in the face of the uncertain outcome of the elections and the possible intentions of the new administration, which would increase demand for dollars.
The third relates to uncertainties about debt negotiations with non-Eurobond commercial creditors, which could delay further disbursements under the IMF programme and associated inflows and, thereby, reduce FX supply in the economy.
“Indeed, the Minister of Finance [ Dr. Mohammed Amin Adam] has announced that the IMF Board will carry out the third review of Ghana’s programme on December 2, 2024. This seems quite belated since staff completed their own review in early October [2024]”, the IEA added.
The fourth is a subdued cocoa crop coupled with possible availability of limited syndicated loan in the face of COCOBOD’s expressed intention to shift to domestic financing of the crop.
Source:
3news.com
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