Ghana’s central bank on Wednesday announced stringent measures to arrest the sharp decline of the Ghanaian currency, the Ghana cedi, by revising the mode of operation of foreign exchange accounts and repatriation of foreign earnings by exporters.
A statement signed by Mrs Caroline Otoo, the Secretary of the Bank of Ghana, dated 4 February, but released on 5 February, said the measures took immediate effect.
Under the new terms, no cheques or cheque books shall be issued for foreign currency while cash withdrawals over the counter from foreign currency accounts shall only be permitted for travel purposes outside Ghana and shall not exceed US$10,000.00 or its equivalent in convertible foreign currency, per person, per travel.
The Bank of Ghana said authorised dealers shall not sell foreign exchange for the credit of foreign currency of their customers while transfers from one foreign currency denominated account to another were not permitted.
“ll transfers outside Ghana from foreign accounts shall be supported by relevant documentation.”
The Bank of Ghana said foreign exchange purchased for the settlement of import bills shall be credited to a margin account which shall be operated and managed by the bank on behalf of the importer for a period not exceeding 30 days.
“No bank shall grant a foreign currency denominated loan or foreign currency linked facility to a customer who is not a foreign exchange earner.
“All undrawn foreign currency denominated facilities shall be converted into local currency with the coming into effect of this Notice. However, existing fully drawn foreign currency denominated facilities and loans to non-foreign exchange earners shall run until expiry.”
The central bank said as part of measures to streamline the collection and repatriation of export proceeds to Ghana the law required all exporters “to collect and repatriate in full the proceeds of their exports to their local banks within 60 days of shipment”.
The central bank said upon receipt of export proceeds, the bank shall within 5 working days convert the proceeds into Ghana cedis based on the average Interbank Foreign Exchange Rate prevailing on the day of conversion.
It advised exporters with retention accounts to continue to operate these accounts in accordance with their retention agreements adding that retention proceeds which were sold to the banks shall be converted into Ghana cedis based on the average Interbank Foreign Exchange Rate prevailing on the day of conversion.
The Bank of Ghana emphasised that offshore foreign exchange deals by resident companies, including exporters, were strictly prohibited.
“All exporters should note that it is their responsibility to ensure that all export proceeds are repatriated in full,” it said, warning that failure to comply with these provisions shall attract sanctions under the law including pecuniary sanctions, jail terms, suspension and revocation of the operating licence as applicable.
Many exporters are said to refuse to repatriate their earnings back to the country, preferring to keep the money outside.
The currency slumped by about 18 per cent last year with the slide continuing this year with the Ghana cedi now pegged at about 2.4 to the US dollar, despite heavy interventions by the central bank. Demand for foreign currency has continued to rise sharply thus undermining the value of the local currency.
This has seen prices climb steeply and triggered loud protests from the public.
Ghana introduced the opening of foreign exchange accounts and operation of foreign exchange bureaux in the 1980s under the watch of the World Bank and International Monetary Fund (IMF) as it liberalised the economy.
The Ghanaian economy has over many years been plagued by goods and services being priced in foreign currency, popularly referred to as “dollarization of the economy”, thus making many people openly buy foreign currency in huge amounts despite laws against such actions.
Traders also buy huge sums of foreign currency from forex bureaux that they use to import a wide range of items thus putting pressure on the Ghana cedi.
While there was immediate hailing on Wednesday of the measures, some economists caution that they would lead to a boom in the black market, especially in the short term.
They stressed that the measures should be strictly implemented while investors had to be assured of security of their investment.