Banking sector needs $1.5bn to stabilise cedi

The banking sector needs about $1.5 billion to stabilize the local currency, industry practitioners have disclosed.

As a result of this, some currency dealers have called for massive injection of dollars, as well as the British Pound into the economy.

Currently, about GH¢6 is to a pound at some commercial banks and forex bureaux while the dollar is almost hitting Ghc4.

Checks with some bank customers indicate that the banks are quoting far higher than the official interbank rate approved by the Bank of Ghana (BoG).

But Dela Quainoo, president of the Financial Market Association, a body which promotes the cause of all currencies dealers in the bank, in an interview with Joy Fm recently in Accra, said banks were not to be blame for the current development.

“The value of every currency is determined by its demand and supply. The Central bank was basically to supply all the markets with all its needs; I mean we would have made a lot of search in terms of banks pricing from the Central bank perspective but so long as there is a large deficit between demand and supply, basically on the back of our fixed cash situation and other issues as well, it always stands to assume that of course, the price would be always be higher because the supply side is very weak at this point.”

Commenting on what could be done to stabilize the situation, he said: “As it stands, people prefer to store their value in terms of foreign currencies.”

“If you look at what has transpired over the past week or two, if I should put it that way, the Central Bank basically tried to increase its interest rate as well as across the yield curve to keep people more or less interested in investing in T-bills.

He continued: “However, it probably has not yielded the results that we expected because probably in the minds of people, the interest demand might not be enough to combat any potential epic depreciation that may occur on the currency and therefore people still prefer to store their value on the dollar.

To be able to keep this, there should be a large injection of forex exchange probably from Europe, one that would be done or the cocoa flow that may come in.”

According to Mr Quainoo, if people begin to feel the injection in the markets, people’s psyche would begin to change so they would stop front-loading their demand.