Opinion: Evron Hughes writes on gov't's FX Development Committee

Opinion: Evron Hughes writes on gov't's FX Development Committee
Source: Evron Hughes
Date: 20-01-2020 Time: 01:01:40:pm

...in January 2019, the newly-reconstituted Economic Policy and Coordinating Committee (EPCC) held its first meeting.

The EPCC is a technical committee at the highest levels of government, tasked with providing effective policy coordination of economic programmes and budgets, which is why it comprises officials from the Ministry of Finance, Bank of Ghana, Controller and Accountant-General's Department, Ghana Revenue Authority, and the Ghana Statistical Service.

The EPCC, in carrying out part of its work, obtained approval to constitute a Foreign Exchange Developments Committee (FXDC) on "HOW TO IMPROVE THE MANAGEMENT, TRANSPARENCY, AND LONG-TERM STRUCTURE OF GHANA'S FOREIGN EXCHANGE FLOWS."

As you will note, the FXDC is not an independent, or separate, if you wish, entity to manage currency fluctuations (or volatility if you wish) or any forex management function already performed by the Bank of Ghana but rather aimed at DEVELOPING THE FOREX MARKET.

Secondly, its focus is on FOREX FLOWS, the FOREX MARKET, new TECHNOLOGIES for the FOREX MARKET etc, not CURRENCY MANAGEMENT (though one could, technically suggest that they interact). 

Let me illustrate with one of the issues the Deputy Minister of Finance suggested the FXDC should explore: that if you compare forex payments made by say importers with data supplied by banks of forex sales, you come up with a large deficit, i.e. far more is paid in excess than sold by banks.

Who is supplying the extra dollars, and how? (Of course, we have an idea). How do they generate their liquidity, and how can these "informal currency markets" (a much nicer name than "black market") which seems to have become a semi-permanent channel in our forex flows, be provided the environment to participate more transparently in the market?

(At this point, an FXDC member offered to bring on board a few "Alhajis" who are informal market participants).

Thirdly, as you will notice, GUTA, and other non-state entities, like IMANI for example, were represented, the former certainly because they understand FOREX FLOWS in ways not every technical person does.

Furthermore, if you look at the mandate of the working teams under the FXDC, you will understand that it's focus, and scope, goes beyond currency management. 

For example, I'm on the FX Innovation/Improvement team, tasked with, among others, proposing a skillset conversion plan for forex traders, an AfCFTA forex strategy to enable Ghana maximise its benefits from the trade pact, and also identifying technology gaps in the FX market.

Take a look at the FX Transaction Execution team for example: among its many tasks, it will review the current instruments/measures used in conducting FX transactions in Ghana.

Another team, Currency Flows, will look at, among other things, ways to formalise the "Black Market" (or, as we shall now call it, informal forex markets).

How anyone could view a FOREX MARKET DEVELOPMENT work as CURRENCY/FOREX VOLATILITY MANAGEMENT work (on in street language, to manage the Cedi, is anyone's guess.)

But, especially, for media houses to come up with a headline which says GOVERNMENT ESTABLISHES FX DEVELOPMENT COMMITTEE TO INVESTIGATE CEDI'S DEPRECIATION clearly tells me that either the journalistic standards at these media houses are well and truly gone to the dogs, or, whoever filed these story lack understanding of business, finance and economic issues and should have never been the one sent on assignment to the event.