Former Director of Monitoring and Evaluation at the Presidency, Dr Tony Aidoo has described measures introduced by the Bank of Ghana to halt the fall of the Cedi as ”panicky”.
”I think the measures announced by the Bank of Ghana yesterday [Wednesday] are good, but they are also panicky measures.”
According to him the BoG’s measures are ”panicky” because they deal with only one side of the problem, ”the demand side of the problem”.
He opined that ”even if we [Ghana] achieve the objectives of dealing with the demand side of the problem, there is a high possibility that the objectives achieved will have a counterproductive effect on the whole situation.”
Dr. Aidoo further explained that the cedi is falling because of the shortage of dollars and foreign currency, relative to the demand, which is on the high.
”… if you restore equilibrium by constraining demand without any measures that increase the supply, what you have created is that you have just constrained the volume or the quantum of foreign currency within a strait jacket, within the period of time the demand will rise again,” he added.
Speaking on Eyewitness News on Thursday, Dr. Aidoo advised the Bank of Ghana to adapt a balance approach, by tackling the misuse of demand with an increase in supply. ”… by tackling the fundamental issue of the few economic actors actually creating the supply, and the majority of economic actors demanding the limited supply.”
He proposed that government widened the net of supply of foreign exchange by ”going to the international credit market and borrow from the banks”.
He also urged government to encourage and give Ghanaians abroad competitive reasons to come and save in Ghana. ” Offer them the incentives to save in Ghana.”
”So you go into the field and get your people to bring that money from foreign banks into your banks, offer them rates of interest above what they are retaining. The accounts they open should be time limited,” he suggested.
BoG Measures to fight Cedi depreciation
The Central Bank on February 4, 2014 announced a series of measures toward arresting the fast depreciation of the Cedi.
The cedi has depreciated by three per cent against the major international currencies this month. In 2013, the local currency suffered a 17-per cent depreciation.
The BoG however, revised rules governing the operations of Foreign Exchange Accounts (FEA) and Foreign Currency Accounts (FCA).
It ordered authorized dealers not to sell foreign exchange for the credit of FEA or FCA of their customers.
It also stated that cash withdrawals over the counter from FEA and FCA shall only be permitted for travel purposes outside Ghana and shall not exceed US$10, 000.00 or its equivalent in convertible foreign currency, per person, per travel.
Also, no bank shall grant a foreign currency denominated loan or foreign currency linked facility to a customer who is not a foreign exchange earner, it added.
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