- Post 08 February 2014
- Last Updated on 08 February 2014
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Henceforth, ministries, departments and agencies (MDAs) of the government will not be allowed to transact business in dollars, the Minister of Finance, Mr Seth Terkper, has said.
That was to ensure that the cedi remained the only medium of business transaction in the economy, he said.
“We do not want government transactions to be dollarised. The cedi remains the only medium for doing business and MDAs should not enter into transactions in dollars, except where necessary and with the express permission of the Ministry of Finance or the Bank of Ghana (BoG),” Mr Terkper stated in Accra yesterday.
In an interaction with journalists on recent developments in the economy, Mr Terkper said MDAs, as well as other government entities, would be permitted to transact business in foreign currencies only under very necessary conditions and with the express permission of the Finance Ministry or the BoG.
“Sometimes it is inevitable to transact in foreign currency. For example, when contractors or service providers have to import items or machinery to undertake jobs locally, they will require permission,” he said, adding that MDAs would be the first to respect the directive by the BoG on foreign exchange transactions.
Explaining further, Mr Terkper said losses which came with converting the cedi to the dollar and vice versa in such transactions, a situation known as foreign exchange losses, had had a huge toll on the government budget, hence the government’s resolve to enforce compliance.
He said the measures announced by the BoG this week were part of measures to reverse the depreciation of the cedi, which was mainly the result of adjustments in the United States economy which was causing the reversal flow of investments from emerging economies to the US.
The BoG, on February 4, announced widespread measures on foreign exchange transactions and account balances and transfers abroad.
Among other things, it directed that upon receipt of export proceeds, banks shall, within five days, convert them into Ghana cedis based on prevailing exchange rates.
The BoG also restricted offshore foreign exchange deals by resident companies, including exporters, and further prohibited local companies from contracting loans either in foreign currencies or with foreign financial institutions.
Business cost, rent and mortgage instruments were also not expected to be priced in dollars but in Ghana cedis.
The net effect of the restrictions on pricing and transacting business in foreign currencies is that foreign exchange will not be bought and held, supply will increase and the cedi will maintain its value.
It also means that importers can only carry with them the equivalent of $10,000 at a time and route the rest through the formal banking system.
The BoG has announced plans to liaise and work closely with other government agencies, including the security agencies, to strictly enforce the directive.
Mr Terkper said the medium-term outlook for the economy remained strong and prospective but that hard decisions and measures were required in the meantime to correct the “volatilities in the system”.
He rejected suggestions that the economy was stronger 30 years ago than it was now, saying the country’s exports and the output of major commodities such as gold and cocoa had now increased exponentially, compared to the past, while the services sector had expanded significantly.
The minister said there were some sectors of the economy where misconduct and malfeasance were causing distortions in the foreign exchange market, saying the government was working through the Ghana Revenue Authority (GRA) to address them.
He cited the valuation and classification of imports conducted by the five destination inspection companies (DICs) in the country, as well as the management of customs bonded warehouse system, as areas where misclassification or inaccurate valuation caused a lot of distortions in the foreign exchange market.
In addition, Mr Terkper said the ministry was working with the GRA to help enforce restrictions on foreign currency transactions by ensuring that transactions permitted in foreign currencies were passed through the formal systems.
Mr Terkper said some of the measures had already started yielding the right results, as the cedi had stabilised and imports were becoming a little expensive; developments which should help further correct the imbalances.
In 2012, when the central bank issued similar restrictions on foreign currencies, it reduced the value of foreign currency accounts from 30 per cent to about five per cent and the current measures are expected to yield even better results.
He said the government had also engaged with its development partners who have started disbursing about $700 million grants accumulated over the past two years and that should contribute to helping the government meet its budget deficit target of 8.5 per cent of GDP.
The Finance Minister said the new government payroll system had started yielding results, particularly in tracking government expenditure and identifying arrears, and it would be expanded to more MDAs.
The Public Services Commission, for instance, would have software for managing human resource and related payroll.
Mr Terkper gave an assurance that the government was pursuing a multi-sectoral approach to implementing a cocktail of policies and measures to stem imbalances in the economy and put the economy on a sound footing.
He said in addition to the government having its eyes on reducing the fiscal deficit, it was also supporting industry and deploying other policies to boost domestic productivity, increase exports, especially non-traditional exports (NTEs), and reduce the external deficits (current account deficits which stood at 12.3 as of the end of 2013) which would also ensure that the cedi maintained a stable value.
Source: Daily Graphic