Business News of 2014-06-16

AGI demand plans to halt cedi decline but welcomes rules reversal

The Association of Ghana Industries (AGI) has welcomed the decision to reverse some of the foreign exchange measures introduced by the Bank of Ghana, but demands plans to halt the cedi from further depreciation.
The review and subsequent reversal of some of the measures have been hailed by some economists and businesses, including the AGI, as a move that will bring about some flexibility in the foreign exchange market.
But the President of AGI, Mr James Asare-Adjei, told the Daily Graphic in an interview that the review was not far-reaching enough. “As at now, there is still a shortage of dollars and the cedi is still depreciating and this is making it difficult for businesses to plan,” he said.
Though, the AGI boss lauded the initiative of the Bank of Ghana to engage relevant stakeholders and the private sector in the consultative and review process, the constant decline of the cedi is making it difficult for businesses to plan and make forecasts.
Forex measures
The Bank of Ghana in February this year introduced some measures to halt the depreciation of the cedi, which was suffering from chronic trade and current account imbalances.
The measures limited access to foreign exchange and restricted trade transactions to the cedi within Ghana, which was until recently described as one of Africa’s top performing economies and most popular frontier markets.
Under the regulations, foreign exchange and foreign currency account holders must provide documentation for transfers outside Ghana and will only be able to withdraw up to the equivalent of US$10,000 for travel abroad.
“We want to see specific activity or programme initiated by the Bank of Ghana to control the depreciation of the cedi for the next three months or quarter, so that we can plan and make projections for our businesses,” Mr Asare-Adjei said.
“We need to make forecasts and projections in order to expand and create the necessary jobs,” he noted, adding that the instability of the cedi was causing difficult times for the private sector.
Review offers some flexibility
But Chartered Economist, Mr John Gatsi, said the review provided some flexibility by the Bank of Ghana in engaging relevant stakeholders. According to Mr Gatsi, “the reversal of some of the forex measures is good and proper for the economy”.
To him, “the review is rather an indication of the level of engagement with those who have been affected by the measure”.
Weakened position on dollarisation
The economist is, however, not happy that the Bank of Ghana has, under the relaxed measures, permitted businesses to index their prices in cedis but accept dollars from non-resident Ghanaians.
That, he said, would weaken the position of the central bank on dollarisation, saying, “We are going back to the era of dollarisation by that”.
Containing cedi depreciation
According to Mr Gatsi, currency depreciation is not just monetary. He indicated that it also depended on other fiscal measures such as revenue mobilisation and export diversification, which were beyond the Bank of Ghana.
Source: graphic.com
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