Forex rules were good, timing was bad – Finance expert

Barely a month after the central bank scrapped foreign exchange measures it introduced to shore up the plummeting cedi, a finance expert has called on government to promote local production to reduce imports that affect the currency.

CEO of Mancapital Partners, Allan Asare, says with the mitigating measure removed, managers of the economy must “go to the drawing table to deal with the actual issue that were causing the depreciation before the policy came.”

 According to Mr Asare, the purposes for which the forex measures were introduced were good, stressing the need for the country to trade in its own currency to “boost rigourous economic activity.”

The Bank of Ghana last August scrapped foreign exchange rules it introduced in February this year to rescue the falling cedi.

The central bank explained that after “consultations with stakeholders and the general public as well as an analysis of the available data” it has decided to amend the forex directives.

As part of the foreign exchange measures, the central bank banned commercial banks and other financial houses from issuing cheques and cheque books on foreign exchange accounts (FEA) and  foreign currency accounts (FCA).

“For me that policy was not a bad one. Policies come to operate in a particular environment and time. I see that the environment and the time the [forex rules] came in was not the right the time”, was Mr Asare’s diagnosis of the directives that earned the central bank a tons of criticisms.

Mr Asare explained that the forex rules came at time when there were speculations that government was facing liquidity issues, adding “so in a situation where government embargoes on certain operations [such as bank transactions in dollars] then people begin to speculate that the government wants to lay his hands on our money.”

He said the problem was exacerbated because within the same period, the policy transactional tax was introduced, further fueling the speculation that the government has run out of money and was introducing the policies to siphon off people’s money.

“So the whole policy came and fed into an open valve of speculation”, he said. He said such speculations have always been detrimental to even robust economies.

Although the cedi has plateaued in the last month, Mr Asare is urging managers of the economy to do more to shore up the local currency.

He said certain policies in the country, such as the concessions granted to foreign companies could cripple local business growth and have the same effect as excessive importation which affects the cedi.

“If you want to decrease importation, then you must boost productivity. We must ensure that we strengthen our local manufacturing firms. Certain policies [on local business] have to be made much softer”, he said. Story by Ghana | Myjoyonline.com | George Nyavor | [email protected]