IEA praises Bank of Ghana for enforcing foreign exchange regulations and calls for further steps to address Cedi collapse

The Institute of Economic Affairs (IEA) has commended the Bank of Ghana (BoG) for implementing some of its suggestions on the enforcement of foreign exchange market regulations.

The political and economic advisory panel also urged the central bank to take further steps to address the collapse of the Cedi.

“The IEA is pleased to note that the BoG has started implementing its latest suggestion to enforce foreign exchange market regulation, including transfers through banks and foreign exchange transactions. The IEA calls on the Bank to consider other suggestions in its 17-point plan for the sustainable stabilization of the cedi,” IEA Research Director Dr. John Kwakye wrote on his Platform X.

This follows measures announced by the central bank to ensure the stability of the Cedi exchange rate.

According to Governor Addison, the Bank has sufficient foreign exchange reserves to support the market, and economic entities should stop making speculative purchases because if a correction occurs, they will suffer economic losses.

Addressing the 118th press conference of the Monetary Policy Committee on Monday, May 27, the Bank of Ghana said it was taking steps to improve market behavior and instill common sense in the foreign exchange market.

BoG attributes currency pressure to high imports, energy sector payments and uncertainty around debt restructuring negotiations

To this end, the Bank has worked with the Ghana Banks Association to streamline documentation requirements for overseas payments to minimize incentives to resort to informal markets.

To cope with the high demand pressure in the foreign exchange market, in the last few weeks the Bank has taken steps to directly absorb the foreign exchange needs of some corporate institutions, which has led to a reduction in pipeline demand for foreign exchange from commercial banks.

The bank said it is fully aware of the activities of illegal operators in the foreign exchange market and is cooperating with the Financial Intelligence Center to clean up the foreign exchange market. Monitoring of currency exchange offices will be increased to ensure compliance with their regulatory framework.

Therefore, all currency exchange offices advertising exchange rates off-site and on social media platforms must immediately stop this practice. The bank has set up a task force to monitor all foreign exchange offices to ensure compliance. The currency market is also affected by sentiment and statements emerging in this election year, and we urge everyone to address statements that undermine confidence in the local economy.

In the area of ​​fiscal policy, spending in the first quarter exceeded revenue growth, which reflects
focusing on IPP arrears.

Cedi: We remain fully committed to the stabilization of the exchange rate – Bank of Ghana

Maintaining rigorous fiscal discipline for the rest of the year will be crucial to strengthen confidence in the economy. Regarding the overall macroeconomic conditions, the committee was of the view that while the implementation of policies – at the level of macro and structural reforms – is consistent and well in line with the objectives of the IMF-supported program, care needs to be taken to ensure that the recent currency depreciation is not embedded in pricing behavior of enterprises and inflation expectations.

Strong reserve creation of around USD 2 billion since the start of the IMF programme, a strong disinflation process, significant progress in fiscal consolidation, a positive current account balance and significant progress in the external debt restructuring process have delivered the expected results together in concert to provide sufficient buffers to support the exchange rate exchange.

The latest forecast shows a slightly elevated inflation profile due to recent exchange rate pressures and adjustments to transport charges. However, the projection shows that at the end of the year inflation will remain within the limits of the monetary policy consultation clause at 13-17%. These forecasts depend on maintaining a restrictive monetary policy stance, including aggressive liquidity management operations.

“Given these considerations, the Committee has decided to maintain the monetary policy rate at 29 percent,” he said.