Some Ghana banks have more foreign than domestic currency in total deposit – BoG
The Bank of Ghana says some banks in Ghana have more foreign currency than they have domestic currency, the Ghana cedi in their total deposits.
The governor of the central bank, Mr. Kwesi Amissah-Arthur said these at a press conference in Accra Wednesday June 13, 2012.
“Our laws allow both residents and non-residents to operate foreign exchange accounts. Any individual or corporate body that operates such an account can easily convert cedis to dollars and pay these monies into the foreign account. Many people have built huge dollar deposits in bank accounts,” he said.
He indicated that this trend has led to the increase in the amount of foreign currencies in banks’ deposits. “The share of foreign currency deposits to total deposits in our banking system has increased from 27.9 per cent in April 2010 to 28.2 per cent in April 2011 and further to 31.8 per cent in April this year. Some banks have more foreign currency deposits than domestic currency in their total deposit,” he said.
According to Mr. Amissah-Arthur the major issue that dominated discussions at the Monetary Policy Committee (MPC), of the central bank’s meeting was the exchange rate pressure and the threat it posed to macro-economic stability.
“The Bank has implemented a number of measures to mop up excess liquidity in the system. These have contributed to stabilizing the exchange rate. As you may recall the policy measures included a review of the currency composition of reserve requirements of banks, the re-introduction of BoG instruments, the maintenance of banks’ Vostro balances in the Central Bank, and stepped-up sterilization efforts,” he said.
He said the Committee notes that the measures that the Bank has taken, have begun to take effect.
“Increases in the policy rate have led to upward adjustments in rates of money market instruments and improved the attractiveness of cedi assets compared to foreign currency assets,” he said.
According to him, the MPC took note of some weakening of the indices of business and consumer confidence, with the composite index of economic activity expanding at a slower pace.
He said however, “private sector credit increased moderately and the banking industry remained stable, sound and profitable.”
Commenting on what he described as the ‘dollarization of the economy’, he said in the last week, there has been speculation and public interest about the result of consultation between the Bank of Ghana and stakeholders in the banking community about ways to stabilize the exchange rates.
“A central aspect of our discussion has related to ways of restraining the growing trend of dollarization in the economy,” he said.
Mr. Amissah-Arthur said dollarization is characterized by a tendency for providers of goods and services to price in foreign exchange and, in many instances, receive payment in foreign currency.
“Examples are the purchase of cars, payment of school fees, mortgage loans, rental payments, airline tickets etc. The service providers quote exchange rates that are significantly off-market. The fringe exchange rates trickle down into the market and become benchmark rates, unduly influencing market rates,” he said.
He emphasised the fact that Ghana’s laws allow both residents and non-residents to operate foreign exchange accounts.
He said the effort to restore the pre-eminence of the cedi in domestic transactions require strict adherence to the provisions of the Foreign Exchange Act 2006 (Act 723) and the accompanying regulations.
“It is our view that this will contribute to restoring confidence in the cedi. The Bank will issue the necessary notices to this effect in due course. However let me assure you that it has not been our intention to abolish the maintenance of foreign exchange accounts by citizens,” he said.
By Emmanuel K. Dogbevi