Forum discusses measures regulating foreign exchange use
A Banker has told the Bank of Ghana (BoG) that its intended review of measures on foreign exchange use in the country should not lead to relaxing the controls.
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The Executive Head of Business Development at Bank of Africa, Mr William Boateng, explained to the GEA Business Forum in Accra that the business community needed to support the measures.
“But the issue is the enforcement and why the lax happened in the first place, knowing that these measures were already embedded in the country’s laws. I hope the review is not a relaxation of the measures, else we will relapse into the situation where we found ourselves a short while ago”.
He was speaking at the May edition of the Business Executive forum organised by the Ghanaian-German Economic Association (GGEA) on the theme: “Understanding the Bank of Ghana directives on forex and the impact of Value Added Tax (VAT) on banking”.
It brought together business executives from a wide segment of the business community including automobiles, banking and finance, energy, manufacturing, insurance, information technology and services.
Mr Boateng, who presented a paper on the impact of the directives on banking, said the dollarisation of the economy was moving out of proportion, and the measures came in handy.
Measures mean well
According to Mr Boateng, the intentions of the BoG were in the right direction but the unintended impacts included the difficulties that businesses were experiencing using foreign exchange for transactions and how businesses priced their products and services with the fast depreciation of the cedi.
The long-term impact also include loss of confidence in the economy which would take the country a longer time to recover from.
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The Bank of Ghana’s measures to check the fast depreciation of the value of the cedi have a silver lining that can enable banks and other financial institutions to promote hedging as a financial instrument to manage exchange rate losses.
The rules instruct that apart from converting transfers from earnings abroad lodged in foreign exchange accounts (FEA) within five working days, holders of foreign currency accounts (FCA) – an account usually used to accumulate foreign currencies locally – could not also cash them except for travel purposes or for payments abroad.
On such occasions, the payments abroad would be transferred electronically by the bank on behalf of the client.
“We at Bank of Africa have secured approval from the BoG to use hedging instruments to help our clients to manage their foreign currency needs,” Mr Boateng stated.
However, the Head of Financial Stability at the Bank of Ghana, Dr Ben Amoah, said the measures had yielded results since its implementation at the end of February.
He said the pace of depreciation had reduced from 7.81 per cent in January; 5.04 per cent in February; 4.77 per cent in March and 3.67 per cent in April. The cumulative depreciation increased from 7.81 per cent in January to 21.29 per cent on April 30.
How to adjust
The Executive Chairman of Krif Ghana Ltd, Mr Kennedy Okosun, who presented a paper on how businesses could adjust to the controls, said the new directives meant that some contracts and agreements would have to be re-negotiated.
He advised businesses to make such re-negotiations a win-win for both parties and avoid stalemates by trying to cash in.
“This is a season of prudent decision making, cutting back on some expenses such as training or travels abroad or suspending them,” he advised.
Mr Okosun also wants manufacturing companies to explore the possibility of sourcing their raw materials locally to avoid challenges with accessing foreign exchange.
“As business people, we need to adjust in all areas possible. These are not the days of business as usual. Re-engineer, re-strategise to continue having a competitive edge,” the Krif Ghana chairman said.
The President of the GGEA, Mr Stephen Antwi, called on the BoG to quickly review the measures to ensure that the unintended consequences on businesses were streamlined to save industries from further losses due to the directives.
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