Business News of 2014-04-02

Forex measures expected to dominate discussions at the MPC meetings

The foreign exchange measures introduced by the Bank of Ghana are expected to take centre stage at the 60th economic review meetings of the Monetary Policy Committee (MPC) which began March 31, 2014.
The Central Bank introduced the new set of measures in February to address the poor performance of the Ghana Cedi since the beginning of the year.
The meetings supposed to end on Wednesday, 3rd April, 2014 with a review of the Monetary Policy Rate are therefore expected to assess the performance of the cedi against especially the dollar since the introduction of the measures. This is critical especially because of its correlation with other key economic variables such inflation.
Even though the local currency has since recorded some marginal stability, there are suggestions this is not sustainable because the measures do not address the weak economic fundamentals which is the underlying cause of the problem.
More analysts continue to question the effectiveness of the measures. First is the Dean of Central Business School, Prof Bill Pupulampu who tells JOY BUSINESS, they have proved to be rather counterproductive.
“If you take for example, the notion that you can't withdraw dollars from your own account that you opened yourself with your own foreign currency, it's a breach of trust which also creates a corresponding breach on the part of the citizens.
So people will actually find other ways of collecting dollars anyway. And that has created a situation where at the point when these measures were announced, I think the cedi was sold for around 2.4 but it's now hovering between 2.6 and 2.9 Ghana cedis on the black market.
So the measures are really not working and that's something we need to be clear about” he said. The Head of Research at the Gold Coast Fund Management, Samuel Kofi Ampah, also says the measures could backfire because more institutions continue to quote their price in dollars.
“What the Bank of Ghana introduced solved a short-term problem and was very appropriate.
It has helped in a way. I believe that the idea of holding back the level of using foreign currencies in the country on the issue of dollarization is also key. But that's where I think we still have a challenge because we still have people trading and quoting in dollars. This is having a bigger toll on us and that's the long term thing we need to look at” he noted