The governor of the Bank of Ghana (BoG), Dr Johnson Asiama, has described the current pressure on the cedi as a short-term blip and assured that the situation will normalise soon.

This, he says, is based on some drastic measures that the Bank of Ghana has implemented to deal with the current challenge with the cedi over the past months.

Dr Johnson Asiama disclosed this in an interview with JOY BUSINESS in response to recent pressure on the Ghana cedi.

The governor described this challenge as a short-term “cash flow” problem, which the regulator believes, with some of the actions taken so far, the expected correction will happen soon.

He added that “the Bank of Ghana operates a managed floating system in terms of framework; therefore, these blips will happen, but the assurance is that this is a short-term issue and the challenges are being addressed.”

Dr Asiama was also of the view that some of these sudden demand pressures have been influenced by the cedi’s sharp appreciation, which has made it a little bit cheaper to import for some of these businesses.

Background

The Ghana cedi has come under some pressure over the past month, due to what some market participants describe as a limited supply of dollars on the market.

The developments have seen the cedi move from around 10 cedis 40 pesewas to a dollar to over 11 cedis in terms of quotes by some of the major commercial banks in the country.

The Bank of Ghana, on the other hand, has moved fast to try and enforce its market regulations to deal with this challenge.

Some of these measures have also helped in dealing with inflow challenges and leakages, especially when it comes to remittances, for which the Central Bank says some correction is taking place.

Regulatory Interventions and Cedi’s Outlook

The Bank of Ghana has scaled back on its forward dollar auctions over the past two months.

The developments resulted in some arguing that the regulator has “run out of dollar cash” to support the market.

But speaking to JOY BUSINESS in an interview, the Governor insisted that this is not the situation on the ground, adding that “we have adequate and enough reserves to support the market”.

“Let me be clear, we are not running out of dollars, adding that the gap between market rates and official rates are being driven by bad market practices,” he maintained.

Dr Asiama was, however, quick to add that the Bank of Ghana always plays a supporting role, rather than being the sole supplier of foreign exchange for the market to aid liquidity.

“We have also taken measures to ensure that liquidity improves in the market together with getting the interbank market to function adequately,” Dr Asiama stated. 

“The interbank market is supposed to take care of itself in terms of inflows from trade and remittance,” the governor added.

The Governor also noted that some remittance companies have been “offshoring Foreign Exchange instead of bringing it home and we have identified these loopholes and shutting it down”

“Some payment service providers have been experimented with crypto and offshore settlement models” he noted.

“While innovation is welcomed, such practices must not weaken the cedi and we will move regulate these activities within the law,” the governor has affirmed.

Dr Asiama assured that his optimism about things turning around soon is based on the fact that the “current macroeconomic situation is sound and solid, which should impact on the cedi’s fortunes going forward.”

The Governor also pointed out, “We should remember that Ghana is under an IMF programme, and we are watching our reserves carefully, especially when it comes to our market interventions.”

“So we can be assured that as far as the IMF programme is concerned and Ghana reserves, we are okay,” Dr Asiama established.