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BoG justifies dollar support levels for banks

March 1, 2019, 1:22 p.m.

The Bank of Ghana (BoG) has justified the amount of dollars it releases onto the market to support operations of commercial banks in the country.

This follows concerns that the limited amount of dollar cash being released onto the market has contributed to the cedis’ fast rate of depreciation over the past weeks.

Concerns by some commercial banks and currency dealers

Some currency dealers and treasurers have argued that challenge facing the cedi is supply issue and if the Bank of Ghana increases the amount of dollars it releases onto the market then the fast depreciation of the cedi would be over. 

The local currency has witnessed some significant depreciation selling at GH¢5.51 at the end of trading on February 25, 2019.

BoG assurances and the outlook for the Ghana cedi 

The Central Bank, on the other hand, argued that they are very active on the market in terms of the dollar cash support. 

The Head of Financial Markets at the Bank of Ghana, Stephen Opata told Joy Business their supports are influenced by several factors on the market including, demand for dollars and the Central Bank’s dollar reserves. 

“Therefore we believe that what we are seeing in the first quarter this year is not driven by external developments but rather local sentiments, which we don’t think warrant significant amount of dollar support in the system,” he said. 

Mr Opata added that their focus now is to build more Foreign Exchange Reserves for challenges ahead.

The Bank of Ghana has maintained that the current challenges facing the local currency does not reflect the fundamentals of the economy, especially when all fiscal situation is improving, especially when for a second year running, the country is having a trade surplus, and the current account is also improving.

He is also promising businesses not to panic because the Bank of Ghana has adequate dollar reserves to up their support if the need be.

Bank of Ghana on cedis outlook

The Head of Financial Markets at the Bank of Ghana also noted that some fresh measures being implemented from the beginning of the year to stabilize the fast rate of the cedis depreciation should end very soon. 

Mr Opata said these new Forex market guidelines, as well as other interventions they are currently considering, should help stabilize the Ghana cedi. 

Economist and Financial Lecturer Professor Godfred Bokpin, for instance, has projected that the current sustained depreciation of the Ghana cedi would be over by the end of March this year. 

Some of the major commercial banks put the cedis rate of depreciation at more than five per cent for this year.