Ghana will soon experience a shortage of fuel at the various pumps across the country due to Foreign Exchange Credit Crunch, affecting the ability of the Bank of Ghana to meet requirements at the various FX auctions.
This is according to Mr Alex Mould, the former Chief Executive Officer of Ghana National Petroleum Corporation (GNPC).
Some Banks, he says, have even stopped quoting FX rates because they do not have the quantities required by the fuel importers (BDCs).
Mr Mould , in a post on Facebook, says the situation, , is cauing the BDC‘s “to max out their credit-line limits with their banks, and the implication is that the banks will no longer have credit lines available for the BDC’s to import fuel going forward”.
He said “Banks are reporting a shortage of FX to meet payments of maturing Letters of Credit (LCs) issued to international oil trading companies such as BP Vitol, Trafigura etc etc”.
“This is due to Bank of Ghana’s inability to meet requirements at the various FX auctions. Some Banks have even stopped quoting FX rates as there is simply no availability for the quantities required by the fuel importers (BDCs)”, he added.
“Banks also are running the risk of maxing out their credit-lines with their corresponding foreign banks that confirm (or guarantee) the local banks’ trade instruments such as Documentary LCs and Standby LCs (aka Guarantees)”, he further explained.
Mr Mould further advised the Government to act decisively and quickly before International Banks’ Credit and Country Risk teams start reviewing their limits to Ghana downwards.
Below is the full statement from Mr Alex Mould
Fuel shortage imminent due to Foreign Exchange credit crunch unless government intervenes
Banks are reporting a shortage of FX to meet payments of maturing Letters of Credit (LCs) issued to international oil trading companies such as BP Vitol, Trafigura etc etc
This is due to Bank of Ghana’s inability to meet requirements at the various FX auctions.
Some Banks have even stopped quoting FX rates as there is simply no availability for the quantities required by the fuel importers (BDCs).
This is causing BDC‘s to max out their credit-line limits with their banks, and the implication is that the banks will no longer have credit lines available for the BDC’s to import fuel going forward.
Banks also are running the risk of maxing out their credit-lines with their corresponding foreign banks that confirm (or guarantee) the local banks’ trade instruments such as Documentary LCs and Standby LCs (aka Guarantees).
This could prove very disastrous for the country as essential imports could come to a grinding halt.
Government needs to act decisively and quickly before International Banks’ Credit and Country Risk teams start reviewing their limits to Ghana downwards , if they have not already done so (since S&Ps recent downgrade – the last of the three major rating agencies to do so) ;
Such actions by the Corresponding International Banks WILL cause a FX credit crunch resulting in an even faster depreciating Cedi!!
GoG MUST accelerate their discussions with IMF to allow a BRIDGE-PROGRAM to be put in place before the main Take-Out Program kicks in sometime in Q1 2023 as reported.
Alexander K Mould (AKM)
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