BoG Should Encourage Inflow Of Foreign Currencies

By Otchere Darko


Instead of using outmoded and unworkable monetary policies, like those that are being put in place by BoG to deal with the current rapid depreciation of Ghana Cedi, our learned Governor of the Bank of Ghana, Dr Henry Kofi Wampah, should consider adopting monetary policies that will encourage the millions of Ghanaians in the Diaspora to bring their surplus incomes home to Ghana to save here, as opposed to saving them in the countries where they reside and work.

Today, there are Ghanaians in almost every country in the world from Alaska, the northern-most State of USA, to Zimbabwe that has in recent years earned the notoriety of having become one of the fast-failing countries in Africa and the world.

About 18 months ago, a diasporic friend of mine, who was planning to transfer all his savings from his country of residence within the Euro zone to Ghana, received a letter from his bankers [in Ghana] saying, inter-alia:

“Management has reviewed its policy on foreign currency deposit accounts with effect from 12th July 2012 as follows:

1. Fixed deposit investment in Pounds Sterling and Euro are no longer available.

2. The Bank will no longer pay interest on Pounds Sterling and Euro Savings accounts.

3. The minimum balance for US dollar savings account to earn interest has been raised from US$10,000.00 to US$20,000.00.

4. The minimum balance for US dollar fixed deposit account has been raised from US$10,000.00 to US$50,000.00.”

It has to be added that my friend’s Bank said in its letter that it was reacting to a BoG directive to banks in Ghana regarding local and foreign currency deposits.

One does not have to be an economist to conclude that any foreign currency deposit policy that makes changes similar to those itemised above is likely to constrict the supply of the three foreign currencies mentioned here. Since the three foreign currencies targeted are the three most globally notable among the four most used foreign currencies in Ghana and West Africa, any policy that leads to a contraction of the supply of any one, or more of these three dominant global currencies is likely to put pressure on their prices and cause them to appreciate in value, relative to the exchange value of our local currency (Ghana Cedi).

In a country, such as Ghana that imports almost hundred percent of all manufactured goods used within its borders, including items like “tooth-pick” or “tooth-stick” and “match Box” that even children below their teens should be able to “manufacture, any monetary policy that restricts the supply of foreign currencies is a recipe for sharp appreciation of the values of the constrained foreign currencies, and for that matter, a recipe for the a deep depreciation of the local currency of that country..... two situational developments that have taken place in Ghana within the last eighteen months.

Instead of instituting foreign currency control measures, such as introducing regulations that aim at exercising control over the demand and use of foreign currencies, and similar measures that ultimately create negative economic effects, the BoG should think of solving the imbalance in the supply and demand ratio of our major foreign currencies by finding ways to increase their supply, rather than trying to reduce the demand for, and use of them.

For example, I suggest that the Bank of Ghana and all the major banks in the country should adopt policies that will encourage Ghanaians living and working outside the country to save in Ghana; and, through such regular savings, to help Ghana to expand the supply of the major foreign currencies, especially US dollars, Pounds Sterling and Euros. To put in place measures that will encourage Ghanaians in the Diaspora to switch their savings from countries where they live and work to Ghana, I suggest that unfriendly foreign currency policies, like those itemised above, should be scrapped in favour of friendly policies that will incentivise the millions of Ghanaians living and working outside Ghana to bring their surplus incomes to save in Ghana and help raise the country’s foreign currency supply in relation to its demand.

*The friendly foreign currency policies that I am asking both BoG and the major Banks in Ghana to adopt should include the following two:

(i) *Cancelling the ‘penalty policy’ that penalised Ghanaians [whether in the Diaspora or in the country] who withdraw in foreign currency part of their own foreign currency savings held in Ghana. Ghanaians in the Diaspora who send their moneys home to save here in Ghana should be free to withdraw whatever part of their savings in the currencies in which their accounts are held. *It fails to make sense to me why Ghanaians in the Diaspora who choose to transfer their monies from outside Ghana to save here and help Ghana cannot withdraw part of their own savings in the currencies in which their foreign currency accounts are held, without incurring penalty. Penalty for breaching what? Let BoG and the other major banks in this foreign-currency hungry country (Ghana) rethink!

(ii) *Paying interest on every foreign savings account set up and maintained in Ghana by Ghanaians in the Diaspora. A policy that sets a minimum balance, below which account balances receive no payment of interest, is not only unnecessary, but also defeatist. If the BoG and other major banks in the country want to entice Ghanaians in the Diaspora to bring their surplus incomes to Ghana to save, they (the BoG and the other major Ghanaian banks) must always offer better inducements than those offered by banks in the countries where Ghanaians in the Diaspora live and work. *The good fisherman is the one who knows when and where to use ‘big bait’ to catch ‘fish that he cannot let go’.

The Governor of the Bank of Ghana, President Mahama, and the governing NDC party must do something positive and workable NOW to save the fast depreciating Ghana Cedi before it becomes “the last straw to break the back” of Ghana’s fast failing “ecomini”.