Boako defends Bawumia’s claim on $80m monthly FX intervention cap

Former Economic Adviser to former Vice-President Dr Mahamudu Bawumia, Dr Gideon Boako, has defended claims that the previous government operated under an IMF-imposed monthly cap on foreign exchange (FX) interventions by the Bank of Ghana (BoG).

Dr Boako said attempts by some government and National Democratic Congress (NDC) communicators to dispute the claim by Dr Bawumia were based on what he described as a misunderstanding of monetary policy and the IMF’s programme negotiations with Ghana.

He rejected arguments that the $3 billion in FX sales cited in the IMF’s 4th Review under the Extended Credit Facility (ECF) disproved the existence of an $80 million monthly intervention limit.

According to Dr Boako, there was an agreed cap on direct FX intervention which was initially set at $80 million per month and subsequently reduced to $60 million.

He explained that the arrangement formed part of programme conditionalities aimed at rebuilding Ghana’s international reserves to agreed levels, adding that the previous administration adhered to the agreed limits.

Dr Boako said Ghana’s performance in rebuilding its reserves by the end of 2024 exceeded the target agreed with the IMF, which he argued provided the basis for the Fund to subsequently allow the current administration greater flexibility to intervene in the foreign exchange market.

He also explained that the absence of an explicit reference to the $80 million or $60 million limit in publicly available IMF reports should not be interpreted as evidence that no such arrangement existed.

According to him, details relating to FX intervention limits are considered market-sensitive and may be redacted from documents submitted to the IMF Board to prevent them from being exploited by market speculators.

“The facts are as follows: There was an agreed intervention cap, scaling down from $80m to $60m,” he said.

Dr Boako further disputed the interpretation of the $3 billion FX sales figure, arguing that it represents more than direct intervention by the central bank.

He said the Bank of Ghana operates separate FX windows, including an auction budget and an intervention budget.

According to him, FX auctions are pre-announced and conducted according to established rules, while FX interventions are discretionary measures used by the central bank to manage excessive volatility in the foreign exchange market.

He said recent IMF reports had also introduced a third window known as the intermediation budget.

Dr Boako therefore argued that the combined figures from the auction, intervention and intermediation windows could account for the total $3 billion in FX sales cited in the IMF report.

“It is therefore wrong to divide $3 billion by 12 and call it proof of intervention,” he stated.

He maintained that distinguishing between the different FX operations was essential to accurately assess the monetary policy arrangements under the previous IMF programme.