As the Bank of Ghana prepares to commence its first dollar auction to banks through a competitive bid, some financial observers have stated that the regulations guiding the process may put excess pressure on the banks.
“You could clearly that the move by the central bank is to try to influence the banks’ rate in terms of the forex rate so even if the bank that wins the auction, has an additional responsibility not to sell the dollar above a particular rate but that is the unfortunate part since it is supposed to be market driven,” Economist Dr. Ebo Turkson told Citi Business News.
The Central Bank last Friday [November 25th, 2016], announced that it will commence the auction of US dollars to banks from Wednesday [November 30], using proceeds from the 1.8 billion dollars Cocoa Syndicated Loan.
Per the regulations, the Bank of Ghana is expected to auction 60 million dollars every two weeks while banks are required to sell the currency not exceeding a stated percentage increase. Commenting on the development, Dr. Ebo Turkson further explained to Citi Business News that though the move may have a positive impact on the FX market in the short term, it may not be sustainable in the long term.
“Even though a central bank can intervene to keep the exchange rate in check, as to actually it will hold in check the rate at which the currency depreciates, I cannot tell,” he opined.
Dr. Turkson added, “This is an indirect way that the Central Bank wants to control the price not through the demand offer but pricing through the price of the auction.”
Already, the cedi has begun witnessing marginal depreciation against major currencies ahead of the festive season. Some industry watchers have blamed the uncertainties surrounding the election as the basis for the depreciation. But the Head of Treasury at HFC Bank, Joseph Nketia in an interview with citibusinessnews.com attributed the development to an increased demand for dollars by retailers.
He was however hopeful that an increased supply of dollars, should normalize the situation.
Joseph Nketia further stressed that the cedi should not cross 4 cedis to one dollar on the interbank foreign exchange market by the end of year.
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