Move to stabilise cedi: Govt, BoG urged to avert leakage of foreign remittances
Banking expert Dr Richmond Atuahene has called on the Ministry of Finance and the Bank of Ghana to ensure that financial technology (fintechs) service providers and Money Transfer Companies (MTCs) in the international remittances space reimburse Bank of Ghana’s Nostro-Accounts or an authorised dealer such as a commercial bank, with foreign exchange components of all foreign exchange accrued.
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He said this will help reduce the current accounts deficit and also help to stabilise the local currency against major trading currencies such as the United States dollar, Euro and UK Pound Sterling.
Reacting to an assurance by the BoG Governor, Dr Ernest Addison, that the cedi will stabilise against the US dollar and other major currencies, Dr Atuahene said despite the assurance, the governor did not provide a clear cut strategy on how the cedi will stabilise against the major trading currencies.
At the First Bank Ghana Gala night last Thursday, Dr Addison told the media that the Ghana cedi will stabilise against the US dollar and the other major foreign currencies.
According to him, the Central Bank is doing everything possible to keep the exchange rate front stable.
“The Governor says he will do everything possible for the cedi to stabilise against the dollar and other major foreign currencies but he didn’t provide a clear cut strategy and how he is going to do that,” Dr Atuahene told the Daily Graphic Business in an interview yesterday in Accra.
Foreign Exchange Act
According to Dr Atuahene per the Foreign Exchange Act of 2006 (Act 723), it is only the Bank of Ghana which has authorised dealership to receive international remittances including financial institutions it has instructed to do so.
However, according to him it is these unauthorised MTCs and fintechs which directly deal with clients and absorb the foreign exchange to their benefit thereby denying the BoG of the needed foreign exchange needed to stabilise the cedi.
“The Bank of Ghana should be prepared to reconcile the Nostro Accounts of all MTCs and Fintech companies; Bank of Ghana should commission some of the international audit firms to conduct forensic audit of all MTC and Fintech companies,” he stated.
Dr Atuahene added that in other emerging economies like Sri Lanka, Bangladesh and Pakistan, remittances have been a key pillar of foreign currency earnings providing a substantial cushion against the widening trade deficit and thereby enhancing the external sector resilience of those countries.
“Being a major source of foreign exchange earnings, workers’ remittances in those countries have covered around 80 per cent of the annual trade deficit, on average, over the past two decades, MTOs and Fintech companies are required to report to central banks,” he noted.
Payment Service Act
Dr Atuahene stated that the Payment Service Act passed by government in 2019 to allow telcos, MTCs and Fintechs to hold on their foreign exchange international remittances without bringing it into the country has worsened the cedi depreciation in the country.
“So remittances for instance in 2022 according to the World Bank was supposed to be about $4.7 billion, but we only got $2.1 billion with the rest going into these fintechs and telcos,” he stated.
He revealed that eight years ago, the government was capturing remittances in foreign exchange at the rate of between 90 to 95 per cent but now it is doing same at the rate of less than 40 per cent.
“Fifty per cent is going into telcos and fintechs,” he stated.
He charged government to reverse the trend and launch ‘a war’ on these MTCs, and Fintechs.