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Control circulation of dollar to curb speculative rates for cedi – Economist tells BoG

Finance Lecturer at UG Business School, Prof. Lord Mensah

An Economist at the University of Ghana Business School, Prof. Lord Mensah has proffered a solution to deal with the speculation of high rates of the cedi to the dollar.

Prof. Lord Mensah wants the Central Bank to control the circulation of the dollar as part of measures to control the Cedi’s depreciation.

His suggestion comes in the wake of an imminent meeting by the Governor of the Central Bank with all managers of banks and operators of forex bureaux to address the depreciation of the cedi.

Speaking on Top Story, Monday, the Economist explained that the economy’s structure, particularly the low productivity, the incoming Christmas festivities and the speculations around the Cedi to dollar rate has accounted for the surge in the local currency’s depreciation.

“With the speculation, mostly you can curb it by controlling the circulation of whatever commodity i.e. I am talking about the dollar now. So effectively, the BoG can say that they are limiting all transactions at the banking hall possibly not to sell even to the forex bureaus, so if they limit it up there, it will control the supply,” he stated.

Prof. Lord Mensah stressed that this measure would deal with the high demand for the dollar.

He wants the meeting to come up with measures to forestall the yearly Cedi depreciation that comes with the Christmas festivities.

According to him, the government should also increase the production of local essential goods to reduce importation.

“For instance, if you go into Agribusiness and you are producing rice and you are able to cut down rice importation by 50%, it is an indirect way of supplying dollars to your market. Effectively, it will reduce the dollar demand on your market,” he added.

The meeting is also supposed to fix what the banks say is the overpricing of the dollar on the market. The local currency has depreciated further to sell at ¢15.20 to one US dollar.

This is about 3.4% depreciation in less than a day, after trading on October 24, at ¢14.70.

Information Minister, Kojo Oppong Nkrumah at an emergency news conference on Monday outlined plans by the government to respond to the depreciation of the Ghanaian currency.

“The Bank of Ghana will be meeting the Managing Directors of some of the banks and the heads of the Forex Bureau Associations for a series of discussions aimed at ensuring that the supply of forex onto the forex markets is stabilised and the overpricing is also halted and that people who need access to Forex for legitimate transactions can get same without hindrance in the banking halls and other forex bureaus as against on the black market,” he said.

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