By Justice Lee Adoboe
ACCRA, Feb. 10 (Xinhua) -- The government of Ghana announced here on Monday its endorsement of measures adopted by the central bank to arrest the falling value of the local cedi currency.
It said cabinet had also agreed on the need to support the Bank of Ghana (BoG) in the implementation of the measures, and directed state agencies to fully support these efforts.
This was contained in a statement issued by the minister of information and media relations, Mahama Ayarigah, after the cabinet concluded an interaction with the governor of the BoG.
The meeting was to clarify a number of concerns arising from its recent measures to address the depreciation of the cedi.
The central bank on Thursday introduced some new measures to arrest certain challenges in the Ghanaian economy. It raised the policy rate by 200 basis points to 18 percent, after raising it to 16 percent in May, last year.
It had also introduced some stringent regulations into the Foreign Exchange (FX) market aimed at arresting the free fall of the cedi, which fell about 14 percent against the U.S. dollar in 2013 and by about 7.8 percent since January 2014 to date.
"Cash withdrawals over the counter from Foreign Exchange Accounts (FEA) and Foreign Currency Accounts (FCA) shall only be permitted for travel purposes outside Ghana and shall not exceed 10,000.00 dollars or its equivalent in convertible foreign currency, per person per travel," the central bank instructed.
"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," the central bank stated in a public notice.
However, some commentators say the measures will rather cause people to stash their dollars away from the formal system, causing acute shortage in the future, and make "Black Market" (illegal form of currency exchange in Ghana) business boom.
Anthony Akoto Osei, former minister of state of finance under the erstwhile New Patriotic Party (NPP) government, said the measures were "knee jerk" and would rather compel people to take their money away from the bank.
"Some aspects of the directives that sought to improve transparency and discourage people from quoting domestic transactions in dollars is healthy.
"But broadly, the nature of this directive will only exact a very short-term appreciation of the cedi and will likely cause a dysfunctional currency market in the future," said Sampson Akligoh, economic analyst of Databank, a local think-tank.
He urged that Ghana must begin to work to develop the FX and provide FX products that would minimize the holding of dollars.
"We must also reduce the transaction cost for both onshore and offshore dollar exchanges, and work to substantially reduce our trade deficit," Akligoh added in a mailed interview with Xinhua.
The government, however, assured the investor community of a friendly business environment, pledging not to impose any hardships on them in the face of ongoing reforms in the foreign exchange market.
Addressing a media round-table on the economy on Friday, minister of Finance Seth Terkper said the intention of the government was not to make things difficult for investors.
"It is not the wish of government to impose any hardships on businesses. I think we must be clear with respect to the temporary fiscal measures we have been implementing as well as the measures that the central bank has been implementing. We just don't want the situation to deteriorate."
Terkper said further that the government would continue to promote stable and friendly business environment for investors and businesses.
"It is not for nothing that we say Ghana should be the gateway for Africa. It is not for nothing that we say that we want some democracy dividend for the political and social stability as well as the economic stability that we are enjoying," Terkper stated.
"For some who think that these are doomsday measures, we just want to remind you that we had similar measures but they taper off; so we just want to remind you that this is not the first time. We take note of the point that it is important to continue with the compliance so that we do not come back and repeating these things, " Terkper stated.
He attributed the difficulties in the economy to the tapering of the U.S. Federal Reserve Bank's policy of quantitative easing, as well as the fall in gold and cocoa prices.
Terkper promised that the government was committed to effecting the necessary measures to stabilize the situation.
"Government will be firm and persist in effecting the necessary measures and strategies to manage volatilities. We are a country of primary commodities exporters, and when gold prices fall, we must respond with appropriate policies," he added.
Deputy Governor of the BoG Millison Narh explained that the measures taken by the central bank were meant to arrest the pressure on the cedi.
"As a central bank we just can't sit back without doing anything. Every other month we meet to assess the developments in the economy as a whole and assess the risk to our main mandate which is price stability and take appropriate action or policy measures," Narh explained.
He emphasized that the measures on foreign exchange accounts and foreign exchange transactions were applicable to all sectors of the economy.