‘BoG Must Explain 9% Reserves Policy’ - Abbey

Dr Joe Abbey, Executive Director of the Center for Policy Analysis (CEPA), has called for clarification from the Bank of Ghana (BoG) on its recent directive to commercial banks to keep a mandatory 9 percent of their total domestic and foreign deposits at the Central Bank in cedis henceforth.

In an interview with CITY & BUSINESS GUIDE in Accra yesterday, Dr Abbey noted: “The Bank of Ghana is now working at what is the cost of mobilizing 9 percent against dollar holdings. So, if the cedi doesn’t stop falling and the 9 percent directive remains unchanged, then more and more cedis would be needed to hold that account.”

He further posed a question to the BoG about the previous cost involved in backing those reserves with foreign exchange.

“What prevents BoG from taking 9 percent of their holding and changing that into cedis? BoG owes it to us to clarify why it is doing this. I assume BoG’s interest at this time is to screw down if not halt the cedi’s value from falling but, it still needs to come out clear for everyone to understand.”

Currently, commercial banks are additionally required to provide 100 percent cedi cover for all Vostro balances held by their foreign banks in the country at the Bank of Ghana. The measures follow a string of losses that has seen the local currency depreciate by 15 percent since the beginning of the year.

Already some commercial banks have started serving letters to their clients who have foreign accounts with them informing them of some monthly fees to be charged on all foreign currency deposits.

Meanwhile, some economic experts have called on the BoG to review its position on the matter and deal leniently with it in order to elicit a positive response.