Foreign currency account holders to pay the price for Cedi depreciation

The Bank of Ghana has issued a directive in a bid to arrest the free fall of the cedi against the major currencies. The local currency continues to fall amidst several directives by the Central Bank to stabilize it.

The latest directive issued by the Bank of Ghana would see operators of foreign currency account lose two percent of their savings annually.

Some holders of such accounts have expressed grave concerns over the new directive. According to some of them it is the job of the Central Bank to stabilize the Cedi adding that if by the inefficiencies of the Central Bank the Cedi has depreciated they must not pay the penalty with their hard-earned foreign currency.

The Executive Director of the Centre for Policy Analysis, CEPA, Dr. Joe Abbey said the anxiety which the Cedi's depreciation has causing is misplaced. He said the depreciation of the Cedi could widely be attributed to the electoral environment as December 2012 elections approach.

He argued that all the elections under Ghana's Fourth Republic has seen the Cedi taken a slump against the major currencies (Dollar, Euro and Pound). He said due to volatility of the political landscape people tend to liquidate their assets into foreign currency as insurance against political instability.

The Cedi has fallen more than 18 percent this year to record lows against the Dollar, triggering recent measures by the Central Bank to support the local currency.

The central bank hiked its key interest rate by one percentage point in April to 14.5 percent.

It also reintroduced short-term bills, changed bank reserve requirements, and required 100 percent cedi cover for vostro balances -held by local banks on behalf of foreign banks - to help stabilise the cedi.