Banks deny engaging in practices contributing to cedi’s depreciation

The Managing Director and Chief Executive of FirstBank Ghana Victor Yaw Asante has rejected claims that some banks are actively engaged in practices that are contributing to the current pressures on the cedi.

Mr. Asante argued that it will be difficult for banks to engage in activities that infringe on the forex regulations.

He explained that the Bank of Ghana has punitive measures designed to deter banks from making any attempt to break the forex rules.

“It is now very expensive to hold dollars if you don’t actually need it”, he said.

Mr. Asante spoke on PM Express Business Edition with host George Wiafe on May 16, 2024 on the Joy News Channel.

He revealed that FirstBank for instance goes to the Bank of Ghana to buy dollars.

“When I put together aggregation from my clients who need dollars to import and do other operations, I go to the Bank of Ghana to get the dollars”.

“We shouldn’t forget that the new cash reserve ratio has also placed additional responsibilities on banks and that makes it difficult to hold dollars when not needed”, he added.

Allegations levelled against commercial banks

There have been reports that some commercial banks are demanding dollars from the Bank of Ghana when they do not actually need it.

Some of the banks are even struggling to provide cedi cover for the dollars being demanded.

Some of the commercial banks are also said to be involved in speculating on the cedi’s depreciation and manipulating foreign exchange price quotes.

Some market players believe that some of the actions have contributed to the current pressures on the cedi.

Current challenge with cedi and outlook

Mr. Asante is of the view that the current pressures on the cedi can largely be linked to persons bringing their dollar needs forward due to uncertainties in the near future.

“These fears, have fuelled the demand that is bringing forward obligations that will fall due later”.

“The Bank of Ghana has taken some measures, including increasing their market intervention and are optimistic that could impact on the currency positively in the coming days”, he added.

Mr. Asante however pointed out that the one of the surest way to stabilize the cedi is to provide a steady flow for traders who need the dollars.

“But we should not forget that, improving dollar supply now might be one of the surest ways to help stabilize the Ghana cedi”.

“In the long term we should look at dealing with the structural issues and improving exports to help manage some of these challenges”, he said.

Mr. Asante pointed out that the interventions should be targeted at dealing with the trade deficit issues, to also deal with the perennial challenge with the cedi.

“It is supply issues. We need to improve the inflow”, he advised.