Business News of 2014-05-13

Replace foreign exchange controls - Private sector

Private sector grouping, the Ghanaian-German Economic Association (GGEA), is calling on the Bank of Ghana (BoG) to take another look at its foreign exchange controls, replacing them with those that will work in the interest of businesses.
The President of the association, Mr Stephen Antwi, told the Daily Graphic last Friday that the new policy initiatives were inimical to businesses and called on the central bank to work with businesses and address the specific concerns through a new set of policies.
“The measures were supposed to bring stability in the foreign exchange market. But since February when they were announced, the cedi has continued to lose grounds to major currencies, giving us strong reasons to ask the BoG to think about a new policy initiative that will help businesses to grow,” he said in a telephone interview ahead of a business forum on the subject matter.
On the theme: “Understanding the Bank of Ghana directives on forex and impact of the Value Added Tax (VAT) on banking services”, the forum will attract chief executives, senior management personnel and business executives from various sectors of the economy over cocktail on Wednesday, May 14.
He said the new set of regulation had put a lot of encumbrances on the way of businesses which genuinely needed foreign exchange for their transactions, due to either shortage at the banks or the laborious processes for accessing them.
The Bank of Ghana announced in April that it would review the exchange rate control measures it introduced in February to halt the fast decline of the value of the cedi against major international currencies.
The measures and the cedi
The cedi lost about 20 per cent against the dollar in the first two months of the year, moving from the GH¢2.15 on December 2013 to GH¢2.24 in the first week of January 2014.
The currency further went down from GH¢2.39 on February 3 at the time the BoG introduced the measures to the current GH¢2.85 of May 9.
The myriad of measures, already codified in laws, included baring over-the-counter withdrawal of foreign currencies except for foreign travels. This will, however, not exceed US$10,000.
Using dollars for payments are also mostly restricted to foreign transactions. The measures were generally intended to make all such payments pass through the banking industry. Thus, the banks will effect the payments on their behalf.
The most hard-hitting of the measures, however, has been the restriction on Foreign Exchange Accounts (FEAs) and Foreign Currency Accounts (FCAs). These are mediums mostly used by businesses and individuals to run their operations and make payments.
Many businesses open FCAs as risk mitigation tool (hedging) against currency value fluctuations. They buy dollars and keep them in this account in anticipation for future payments.
The FEA, on the other hand, is primarily used by businesses to receive payments in foreign currencies from parties abroad, usually from export receipts.
The BoG directives barred withdrawals from both the FCAs and FEAs, except for payments abroad, which the bankers are supposed to effect on their behalf. However, in the case of the FEAs, any due receipts were to be effected within 60 days and the funds so received should be converted to Ghana cedis within five days.
In addition, most companies, hotels and hospitality facilities, including government contracts, were not to quote in dollars, but in the local currency.
Impact on private sector
The private sector and business people have had challenges with the directives, especially with the operation of the two accounts, complaining that it restricted them.
Sometimes, at the time they needed the forex, the banks were not ready with them, hence their preference to save or have control over their own forex.
Mr Antwi said although resolving the exchange rate challenge was structural and required long-term measures, such as cutting imports or increasing exports, “until then, we need another policy that works.”
The GGEA president said the Bank of Ghana should consult with the business community to enable them to fashion out something better in the interest of the business community, saying “it may be the law, but if it is not working for both the regulator and other parties, it must be reviewed.”
Considering the importance of the topics, the GGEA has assembled masters of the subject matter to speak at the forum. They include the Governor of the Bank of Ghana, Dr Henry Kofi Wampah; the Chief Executive of Ecobank Ghana, Mr Samuel Adjei Ashitey, and the Managing Director of Bank of Africa, Mr Kobby Andah.
The Executive Chairman of Krif Ghana Ltd, Mr Kennedy Okosun, will share the impact of the directives from the business perspective.
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