The President of the Chartered Institute of Bankers (CIB) Ghana, Mr Clifford Mettle, has called on the Bank of Ghana (BoG) to review the measures it instituted to halt the decline of the cedi against the major international trading currencies.
He said while some of the measures were holding, others had not been effective, thereby necessitating a review to take off the ineffective ones and enhance those that were working.
Mr Mettle made the call at the opening of the 19th National Banking Conference organised by the institute in Accra.
It was on the theme: “Building a stable local currency: A prerequisite for sustainable growth.”
Ever since the The BoG, in May 2015, raised its benchmark interest rate by 100 basis points from 21 to 22 per cent in a bid to bolster the cedi it has seen some decline in value.
In fact the cedi has, from January, cumulatively depreciated by 17.2 per cent against the dollar as the government struggles to keep debt under control and battle a drop in foreign currency reserves.
That prompted the authorities to turn to the International Monetary Fund (IMF) in April for emergency aid of about $900 million to help finance the fiscal gap and bolster the currency.
We want to point out that the core task of a central bank is to safeguard the purchasing power of the local currency and create a zone of monetary stability.
This is very important since the adverse perennial fluctuation of the cedi was impacting negatively on businesses.
In view of this, we suggested that players in the industry should be brought together to brainstorm to see what accounted for the situation and engage with the government on the way forward.
We think that the demand for the dollar, which outstripped the supply , accounts for the depreciation of the cedi, since businesses had to use huge quantities of the local currency to make exchanges for the dollar.
There is therefore, the need for the government to address the supply side of the dollar in order to ensure adequacy, so that the cedi did not spiral out of control.
It is also important to state that the import-dependent nature of the economy had led to fluctuation in the exchange rate of the cedi, especially against the dollar.
We all know that inflows from the cocoa sector, coupled with the setting up of an EXIM Bank in Ghana which was expected to fund exports, would help in bringing the situation under check, but how fast?.
Government must pursue all favourable policy options to ensure that the country’s quest to move up to a higher middle-income status did not suffer any setback.
There must therefore be a strengthening of the fundamental economic indicators in the quest to arrest the falling rate of the cedi.
