The Bank of Ghana has announced intervention measures to save the cedi from declining further.
The cedi has since the last quarter of 2011 weakened against the US dollar in the foreign exchange market and this has accentuated uncertainties and risked the growth of the economy, but the Governor of the Bank of Ghana, Paa Kwesi Amissah Arthur, told journalists in Accra there were plans to institute a number of measures to reverse the dollarisation of the economy.
Briefing journalists on major decisions taken by the Monetary Policy Committee at its 50th session, he said immediate measures taken included increasing the policy rates by one percent. This means the policy rates have been moved from 13.5 percent to 14.5 percent.
To improve the supply of foreign exchange by banks to the market, the single currency Net Open Position (NOP) of banks have also been reduced from 15 percent to 10 percent while the aggregate Net Open Position would also drop from 30 percent to 20 percent.
Mr Amissah Arthur admitted that the recent developments in the exchange rate remained a major source of concern and its possible impact on inflation as well as implication for the country�s international reserves called for policy measures to stem the trend.
He explained that the depreciation of the cedi was driven by a growing demand for foreign exchange to support increased economic activity due to the expansion of the economy.
Others included changes in the trade patterns, which is shifting towards Asia, especially China, in which transactions are mostly conducted on cash basis and external sector conditions such as the Euro zone crisis, as well as speculative activities by foreign exchange traders.
The policy interventions, he said, would aim at minimizing the risks to inflation and growth by stemming the depreciation of the cedi in order to build reserves to levels that would be able to withstand external shocks.
In addition to strengthening controls to reverse the trend, the governor said the bank would �also be monitoring development closely and will not hesitate to take additional measures if deemed necessary.�
The Monetary Policy Committee observed that the banking sector was robust and there was buoyant performance on the Ghana stock exchange, while consumer confidence had also improved.
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