General News of Friday, 7 February 2014
Policy think tank, IMANI Ghana, has criticised new forex rules by the Bank of Ghana (BOG) aimed at shoring up the cedi against major international currencies.
According to IMANI, the BOG’s new rules, one of which prohibits over-the-counter cash withdrawals of more than US$10,000, will help boost a foreign exchange black market and cause the cost of doing business to shoot up.
“…they just handed the US Dollar to the black market and almost quadrupled the costs of all businesses in the country in the short to medium term with effects that would last longer than the anticipated benefits,” IMANI President, Mr Franklin Cudjoe told Graphic.com.gh Thursday.
This, he explained is because Ghana’s economy is "largely an import-led one with a greater percentage of manufacturing resources imported".
Mr Cudjoe said the new forex rules will hurt business owners such as spare-part dealers who rely heavily on dollars for importation.
He also suggested that smuggling of cocoa out of the country will increase on account of the new forex rules.
“Payment for cocoa farmers will be affected, meaning the value of what they receive will be diminished. Some might just sell to Ivory Coast,” he said.
The IMANI President called on the government to learn from the experience of other countries which have had to deal with currency depreciation of their own in recent times.
“Zimbabwe may be a farfetched example, but to deal with their almost worthless zim currency, they dollarized to tame hyperinflation, restore stability, enhance budget discipline and monetary credibility. All we should do in the interim is not to disturb the forex regime.
"The effects of a growing or deepening belief that the 'regulatory environment is uncertain or unpredictable' show up more in the medium rather than the short-term, and are often more chronic than acute in nature," he stated.
Mr Cudjoe underscored the need to be alert to "more insidious indicators" such as capital projects that get abandoned mid-way.
The BOG, which imposed the new rules Wednesday, also banned commercial banks and other financial institutions from issuing cheques and cheque books on foreign exchange accounts (FEA) and foreign currency accounts (FCA).
The central bank went on to direct banks not to grant a foreign currency-denominated loan or foreign currency-linked facility to a customer who is not a foreign exchange earner.
Offshore foreign deals by resident companies, including exporters in the country, has also been prohibited.