BoG Governor expresses concern over foreign currency hoarding outside the banking system
Dr. Ernest Addison, the Governor of the Bank of Ghana, has expressed deep concern regarding the practice of hoarding substantial amounts of foreign currencies outside the banking system.
While addressing reporters at the bank’s Monetary Policy Committee press conference in Accra, he highlighted the worrisome nature of such actions but refrained from commenting further on the reported hoarding of one million dollars and 300,000 Euros by former Water Resources and Sanitation Minister, Cecilia Dapaah at her home, as the matter is currently before the courts.
The Bank of Ghana has consistently advocated for individuals and institutions to keep their foreign and local currencies within commercial banks in the country. This approach is crucial for effective monetary policy implementation, aiding in the management of currency circulation and supporting the central bank’s inflation targeting policy. Additionally, it provides commercial banks with the necessary foreign exchange reserves for conducting international transactions and facilitates the bank’s policy of financial intermediation in the nation.
To tackle the increasing trend of currencies held outside the banking sector, Dr. Addison revealed that the Bank of Ghana is employing various monetary tools. According to recent data from the central bank, the volume of currencies outside the banking sector has risen from 22.1 billion Ghana cedis in May 2022 to 31.6 billion Ghana cedis as of May 2023. To address this challenge, the central bank has intensified its open market operations and enhanced liquidity management instruments.
Furthermore, Dr. Addison acknowledged that seasonal factors, such as the purchase of cocoa and gold, contribute to this spike. However, he emphasized that the Bank of Ghana has already implemented measures, such as a cedi cover for gold purchases, to address these challenges effectively.
In a bid to improve security and minimize robbery attacks on cash transportation, the Bank of Ghana directed all commercial banks in the country to acquire bulletproof bullion vans by July 1, 2023. The governor confirmed that the majority of the banks have complied with this directive.
In addition to currency-related matters, all commercial banks have submitted their recapitalization plans to the central bank ahead of the September deadline. This submission is a prerequisite for the operationalization of the Ghana National Financial Stability Fund and may influence any future support requests from banks to the Bank of Ghana.
Finally, the Governor addressed the recent suspension of Forex Licenses for Fidelity Bank and First National Bank of South Africa. The banks were penalized for breaching certain operational measures. However, he clarified that their licenses have been restored even ahead of the deadline, indicating their cooperation with regulatory requirements.
The Bank of Ghana remains vigilant in its efforts to promote financial stability and effective monetary policy, emphasizing collaboration with commercial banks and strict adherence to regulatory guidelines.
