The Bank of Ghana(BoG) has cancelled the auctioning of dollars to banks in the country.The central bank in January this year announced plans to release $120 million onto the market for the first quarter of this year as part of its plan to help stabilize the cedi.
The auction which was restricted to licensed foreign exchange dealing banks was scheduled for $40 million in January, February and March this year, totaling $120 million.
But the Governor of the Bank of Ghana, Dr. Ernest Addison confirmed to Head of Business Desk at Citi FM, Vivian Kai Lokko at the sidelines of the Spring Meetings in Washington D.C that the auctioning of dollars ceased in March.
He explained that the last auction for March was suspended.
“We have argued that it’s important for us to strengthen the interbank market for foreign exchange rather than going back to the system of auctioning foreign exchange. This is one of the ongoing discussions we are having with the IMF. So it’s an ongoing issue, I don’t see why the interbank market will not work,” he assured.
He stressed that there is the need to allow the interbank market to operate is injecting foreign currencies into the economy.
“If the rules guiding the market are properly enforced the banks are requested to stay within the net open position limits we do not see why the interbank market could not be an efficient way in determining,” he said.
Meanwhile in its recent Mission Concluding Statement, the International Monetary Fund(IMF) stated that “ There is a pressing need to develop a coherent and transparent foreign exchange (FX) policy”.
“The authorities are of the view that the FX auctions have not worked well, and as result the last auction was canceled. In the mission’s view, the FX auctions, if properly implemented, will help increase transparency and price discovery in the market.” The statement explained.
The fund further urged on the BoG to continue its efforts to develop and deepen the FX market, building on progress achieved last year when surrender requirements for gold and cocoa export proceeds were eliminated and FX auctions were introduced
“For the IT framework to be fully effective, the BoG’s FX intervention policy should be limited to smoothing exchange rate volatility rather than supporting directly the value of the cedi” it said.
(By: Lawrence Segbefia)