Ghana central bank eases restrictions on foreign currencies

Ghana's central bank has eased restrictions on the use of the US dollar and the euro in order to boost foreign exchange supplies and stem the continuing fall of the local currency. Companies have complained that the new rules had not had the desired effect of preventing the fall of the cedi and had, instead, harmed businesses and made dollars and euros harder to obtain.

The previous rules, imposed by the Bank of Ghana (BoG) in February in order to prevent Ghana becoming dependent on foreign currencies, required, among other things, that all companies use the cedi in local transactions; and that exporters convert takings from foreign sales into cedis within five days. They limited the use of dollars and euros to exporters and importers and set limits on who could have accounts denominated in foreign currencies.

BoG governor Henry Kofi Wampah told reporters that the relaxing of the rules means that foreign companies can pay local businesses using non-cedi currencies, and that exporters can keep 60% of proceeds in foreign-denominated accounts; the remaining 40% will have to be converted into cedis within 15 days, rather than five. It is hoped that the new rules will increase the availability of foreign currency on the market.

As a further means of ensuring a regular foreign currency supply, the BoG is recommending that the government compel firms operating in the oil and mining sectors in Ghana to keep part of their profits in the country. It is also encouraging those who do business in China to use the yuan instead of the US dollar as a means of shoring up the cedi.

Already, some of Ghana's commercial banks have established relationships with their Chinese counterparts. Zenith Bank has a representative office in China and Ecobank has a dedicated China desk in several of its branches. Ghanaian traders heading to China currently need to take dollars with them that are later converted to yuan. Doing business in the Chinese currency would ease pressure on the cedi, as well as decreasing the demand for dollars, Dr Wampah said.

Last year, the yuan surpassed the euro to become the world’s second most-used currency in global trade finance after the dollar.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2014 Menas Associates

Ghana: New measures positively impacting local currency

The Bank of Ghana's head of financial stability says that the new measures introduced by the bank are already positively impacting the local currency.

At an Institute of Economic Affairs policy forum, Benjamin Amoah said that the cumulative depreciation of the cedi, which stood at 7.2% at the start of January, had reduced to 1.29% by mid-April thanks to a number of policy changes, including the raising of the policy rate by 200 basis points to 18% and the hiking of reserve requirements.

To consolidate these gains, he said, the government should adhere to budgetary targets, improve revenue mobilisation by widening the tax net, diversify exports and make a greater effort to block foreign exchange leakages. He said that greater collaboration and communication between fiscal managers and the central bank would also be beneficial.

A Reuters report issued last week suggested, however, that the impact of central bank measures is unlikely to last. Analysts are predicting a further fall in the cedi over the next week because of the unmet dollar demand from importers. 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.
© 2014 Menas Associates

World Bank still rates Ghana as top West African country

 

World Bank still rates Ghana as top West African country for “doing business”, as Vice President Kwesi Amissah-Arthur confirms that GDP growth should still exceed 7% this year. There has been no follow on after recent rumours that Minister of Finance Seth Terkper is set to be replaced by President Mahama because of his performance at the helm of the economy and the monetary policy-focused Bank of Ghana has escaped the opprobrium for the deteriorating fiscal position.

 

Ghana's Vice President and former Bank of Ghana governor, Kwesi Amissah-Arthur, has confirmed that Ghana's economic growth will still exceed 7% this year as Finance Ministry officials have recently indicated. According to Amissah-Arthur, GDP growth should reach 7.2% for 2013 even if over 0.5% lower than the predicted 7.9% - with this shortfall unfortunately one of the reasons that the deficit will be reduced more slowly than expected. The 7.2% figure is slightly less than the 7.5% figure presented by Terkper late last month when complaining about the Fitch ratings agency's decision to downgrade.

 

At least the World Bank is more optimistic, on a relative basis compared to Fitch, on the business environment. In its latest “Doing Business” report for 2014 it confirmed Ghana as the highest ranking West African or ECOWAS country. This is despite Ghana's global ranking fell slightly to 67th out of 189 countries because of increasing the administrative requirements on those starting businesses.

 

Ghana was, however, not on the World Bank list of countries that had most improving their business regulations since 2009 which was when John Kufuor handed over the presidency to John Atta Mills. One may interpret this in more than one way including that Ghana has provided a relatively business-friendly environment over a longer period of time. Indeed, Ghana is one of the twenty most improved countries since 2005 - with twelve significant regulatory reforms – and was highlighted as having made major strides in improving domestic access to credit over the past five years.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

 

© 2013 Menas Associates

Ghanaian government hopes to increase credit for businesses

The Ghanaian government hopes to increase access to credit for small and medium sized businesses by stepping up pressure on commercial banks to lower interest rates. Finance Minister Kwabena Duffuor described the high bank lending rates, which run at around 28 per cent per year compared to a Bank of Ghana key policy rate that has fallen to13.5 per cent, as “unacceptable”.

The Minister told a conference in Accra, “It came out clearly that overheads of the banks are going up astronomically and it's just not right. But they are doing it, hence the decision to sit down with them and look at the situation seriously”.
He said that the Finance Ministry would hold talks with the banks to ensure that they comply with the administration's policy to ease credit for businesses.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2010 Menas Associates