BoG outlines new forex rules

The Bank of Ghana has introduced new foreign exchange rules that will from July 1 this year require exporters to repatriate all export proceeds to the country, altering several forex requirements of the central bank.

The measure follows earlier directives last month for mining companies to surrender all their foreign exchange directly to the banks, which hitherto was surrendered to the central bank.

By these new rules, the 60-day mandatory repatriation of export proceeds will no longer apply and the repatriation period of export proceeds will now be aligned with the terms agreed between trading parties.

Additionally, the 5-day mandatory conversion of export receipts into Ghana cedis has been reversed and the previous requirement for exporters to retain up to 60 percent of their export receipts in their Foreign Exchange Account is quashed, with no need to convert 40 percent of the proceeds into Ghana cedis at market rates within 15 days.

These, according to the central bank are part of measures to deepen the foreign exchange market and promote greater transparency in the determination of exchange rates as the central bank attempts to limit its role in forex market.

The Bank of Ghana explained that the measures thus require exporters to transfer export proceeds through an external bank to their Foreign Exchange Account with any of the banks in the country on receipt of the money, or within 60 days from the day of shipping goods.

The the Bank of Ghana’s new requirements on the surrender and repatriation of export receipts come at a time the cedi has shown resilience against major trading currencies -- depreciating by under 1 percent against the US dollar.

It is expected that the new rules will help curb speculative activities, since players in the financial services sector will have knowledge about the inflow of foreign currencies into the market at any particular point in time; and that the central bank’s intervention in the market will also be reduced with the new rules.

At the recent post-Monetary Policy Committee meeting with the media, Bank of Ghana Governor Dr.Abdul-Nashiru Issahaku explained that the central bank has had a challenge in determining the market’s demands, saying: “Once the funds are given directly to the banks they can trade with them, and we think that is much more measured and also good for the market.”

The Bank of Ghana’s approach is in contrast with its posture a couple years ago, when the central bank imposed strict foreign exchange regulations in an attempt to contain a fall in the cedi, which backfired as the market responded negatively, resulting in a devastating fall in value of the cedi.