Bank of Ghana announces measures to 'arrest' the cedi's free fall
The Bank of Ghana has announced a three-prong measure to stabilise the cedi and reinforce the monetary policy stance as well as restore stability and transparency in the foreign exchange market, a statement from the Bank has said.
The requirements which would take effect on May 1, include the re-introduction of short-term Bank of Ghana Bills in the following tenors - 30 days, 60 days and 270 days, which is intended to support the monetary operations of Bank of Ghana and provide additional avenues for cedi investments.
The Bank of Ghana is also asking all banks to maintain the mandatory 9 per cent reserve requirement on domestic and foreign deposit liabilities in Ghana cedis only.
“Consequently, banks will no longer hold the reserves in different currencies, the statement said.
Besides, all banks will be required to provide 100 percent cedi cover for their 'vostro' balances, to be maintained at Bank of Ghana in line with the provision in the Operational Guidelines Pursuant to the Foreign Exchange Act that precludes foreign investor participation in the short end of the money market.
This is also consistent with the 27th March 2012 directive of Bank of Ghana to all banks.
The statement said since the last meeting of the Monetary Policy Committee (MPC), the transactions market for foreign exchange remained broadly stable, consistent with economic fundamentals.
However, speculative activity of currency traders in the inter-bank foreign exchange market continued to exert pressures on exchange rates, resulting in continuing depreciation of the Ghana cedi.
The MPC at its last meeting increased the policy rate and reduced the limits on Net Open Position (NOP) of banks. The measures were intended to improve the attractiveness of cedi assets and increase the supply of foreign exchange to the market. The Bank further indicated that it would closely monitor developments and take additional measures if deemed necessary.