According to BoG, the US Dollar has strengthened against all major currencies. From the beginning of the year to date, the pound sterling has weakened against the US dollar by 12.4 percent while the Euro has also weakened by 11.8 percent. Countries similar to Ghana (Ghana’s peers) are all experiencing sharp depreciation to date.
The Ghana Cedi has depreciated by 25.5 percent year-to-date, reflecting the Ghana- specific situation, including the challenging financing of the budget from both domestic and external sources, downgrading of soverign credit rating, non- residents disinvestment in local currency bonds, and loss of reserve buffers.
Owing to the factors above, the following measures have been put in place;
1. Raised the Monetary Policy Rate by a significant 300 basis point to 22%.
2. Raised the primary reserve requirement of banks from 12% to 15% to be implemented in a phased manner:
(i) 13% from 1st Sept, 2022
(ii) 14% by 1st Oct, 2022
(iii) 15% by 1st Nov, 2022
3.Boosting supply of foreign exchange and strengtheing BoG’s FX auctions by “working collaboratively with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies.”
According to Bank of Ghana, the last measure will require a lot of pressure and persuasion on the extractive industry players; but a an extremely necessary ask.
The role of the telcos in the repatriational pressures on the cedi should not also be underestimated. If these profit-making entities choose not to cooperate they risk making the case of the imposition of a hefty windfall tax, in my view, very very difficult to resist.
All these are measures to help tackle the galloping inflation rate and tackle the free fall of the cedi to the US dollars.
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