Editorial: Dollarisation remains a major concern to cedi’s stability

Export-oriented businesses in the country are being urged to reinvest their foreign exchange earnings domestically to sustain durability of the cedi’s recent appreciation.

Bank of Ghana Governor Dr. Johnson Pandit Asiama made the call when he addressed the Graphic Business/Stanbic Bank Breakfast Meeting and noted that the current foreign exchange stability marks a turning point for Ghana’s economy, but sustaining it will require a shift in corporate behaviour and strategic planning.

“The more value we keep within Ghana, the stronger the cedi becomes,” he told participants. “Firms that invoice in cedis or reinvest their export earnings locally are not only reducing their own risks – they are strengthening the economic ecosystem.”

The cedi has appreciated by more than 42 percent so far this year, reversing much of the depreciation recorded in 2022 and 2023. Additionally, foreign reserves have risen to            US$11.1billion, covering close to five months of imports.

Dr. Asiama stressed that structural issues such as low domestic retention of export proceeds and a culture of dollar-pricing are weakening the impact of foreign exchange gains.

He noted that too many exporters hold earnings offshore or fail to channel them into productive investment within the country. “The mismatch between inflows and reinvestment is a problem.”

Consequently, the central bank plans to link public procurement preferences and credit access to evidence of reinvestment – particularly for SMEs. Tax incentives are also under consideration.

Dollarisation, particularly in the real estate and education sectors, remains a major concern. “We will step up enforcement of legal tender laws,” Dr. Asiama said, adding that continued use of the dollar for local transactions undermines the cedi’s credibility.

Enforcement of legal tender laws will be stepped up, especially in sectors where forex pricing has become normalised, he cautioned.

While the cedi’s strength has helped lower inflation and restore investor confidence, prolonged appreciation could hurt export competitiveness if it’s not managed carefully, the BoG Governor conceded.

Dr. Asiama also stated that the central bank will adjust its policy stance based on evolving data and market conditions.

The post Editorial: Dollarisation remains a major concern to cedi’s stability appeared first on The Business & Financial Times.

Read Full Story