Economist spells out solutions to forex market leakage
Adnan Adams Mohammed
An economist has called on the Bank of Ghana (BoG) to adopt a system to help track the forex market activities to help regulate loopholes in the exchange rate system to slow down the rate of Cedi depreciation.
“We have others who buy foreign currency. We have no track of any transaction. In most African countries any time you exchange any foreign currency, you need to send an ID, you need to enter into the system. But not in our case. Now it’s so easy. You need to make a phone call. Somebody comes on a motorbike and gives you foreign currency”, Professor Peter Quartey, an economist at University of Ghana has said.
His call comes at a time when Ghanaian traders and businesses have sighed a relief from the skyrocketing depreciation in value of the local currency against the convertible currencies. The cedi, after it lost value to the US dollar at an exchange rate of GHC5.8 to US$1.0 earlier in March, has begun to gain strength as at last week Friday, March 29, 2019, as US$1.0 is now changing for GHC5.15 on the forex market.
The cedi has “appreciated by 5.12 percent in March 2019 alone as against a depreciation of 2.7 percent in the same period last year”, according to data from Bloomberg terminal.
The cedi has made great strides towards recovery on the back of the successful issue of the US$3 billion Eurobond and the completion of the IMF review, which restored confidence in the economy”, Ken Ofori-Atta, Minister of Finance has asserted when addressing parliament last week.
However, the government anticipates the stability of the cedi going forward at the back of existing sound economic fundamentals and measures put in place by the Central bank.
Some key events that took place in March which possibly impacted on the cedi’s appreciation included; the formal completion of the Extended Credit Facility programme with the IMF, the US$3 billion Eurobond Issuance, the recent development on the foreign exchange market and the cedi as well as the visit of the World Bank Vice President for Africa, Dr Hafez Ghanem.
But, Prof. Peter Quartey has noted that, Ghana has no track of foreign currency transactions unlike in most African countries where a form of identification is entered into their system before any exchange on foreign currency is done. He said, this paves way for ‘black market’ dealings to thrive especially when people can easily contact individual sellers who then delivers at their door step.
“No matter how much Bank of Ghana pumps into the system, there is a leakage. There is a way out. People take it out easily. If we are able to monitor and know where this demand pressure is coming, then we can fashion out policies to address them. These are some of the grey areas we need to tighten so that we are able to manage the exchange rate system”, he said.