The new Bank of Ghana forex guidelines could increase the daily interbank trade volumes from about US$25million to about US$65million, which will significantly sustain stability over long periods, a report by RMB Global Markets Research has said.
The local currency tipped out of its GH¢3.80 to GH¢3.90 comfort range of the past few weeks, edging to intraday of GH¢3.92 last week.
With the new central bank guidelines, which will take effect from July 1, the portion of FX receipts from minerals and cocoa will no longer have to be surrendered to the BoG but go directly to commercial banks.
The report by the research arm of corporate investment bank RMB believes the guidelines will reduce pressure on the cedi, saying: “We see easing pressure over the next few weeks. The cedi is experiencing pressure as a result of high dollar demand from oil importers and multinationals”.
The BoG guidelines seek to reduce the regulator’s involvement in the daily forex market and give more freedom to commercial banks to work with other players in the market.
The new rules require exporters to repatriate all export proceeds to the country, which alters several forex requirements of the central bank. Also, the regulator has recently directed mining companies to surrender all their foreign exchange directly to the banks, which hitherto was surrendered to the central bank.
By these new rules the 60-day mandatory repatriation of export proceeds will no longer apply, and the repatriation period of export proceeds will now be aligned with the terms agreed between trading parties.
These, according to the central bank, are part of measures to deepen the foreign exchange market and promote greater transparency in the determination of exchange rates as the central bank attempts to limit its role in forex market.
It is expected that the new rules will help curb speculative activities, since players in the financial services sector will have knowledge about the inflow of foreign currencies into the market at any particular point in time.
Sampson Akligoh, Managing Director of InvestCorp-an investment bank, told the B&FT that the new BoG guidelines are a step in the right direction and will help stabilise the market.
“This decision is long overdue because the banking sector and other players including exporters and importers understand their FX needs more than the Central Bank, so we will see a significant improvement in allocating FX.
“This means that the FX market, over the medium term, is going to be more stable than today. In that regard, the decision is going to improve transparency and efficiency significantly for the country,” he said.
“In modern times, the market is able to allocate FX more efficiently than the central bank can do,” he said.
“If the central bank is making a lot of FX available to the banking sector, then there will be significant stability as compared to history. I strongly believe that it is a good decision and a way for the market’s future to really appreciate.”
Source: B &FT