The Bank of Ghana (BoG) has attributed the high spate of dollarization in the country to the importation of huge volumes of foreign currency by banks operating in the country to satisfy the needs of clients.
Paa Kwesi Amissah-Arthur, Governor of the Bank of Ghana disclosed this while presenting the BoG�s Monetary Policy Committee (MPC) Report for May, this year to journalists in Accra.
Noting that the easy availability of foreign cash fuelled the dollarization, he added that his outfit had decided to initiate a process of reclaiming the primacy of the domestic currency in trading activities.
�The effort to restore the pre-eminence of the cedi in domestic transactions requires strict adherence to the provisions of the Foreign Exchange Act 2006 (Act 723) and its accompanying regulations.�
Mr Amissah-Arthur expressed the hope that such a measure will contribute to restoring confidence in the cedi, adding that BoG will issue notices in due course. However, he said his outfit does not intend to abolish the maintenance of foreign exchange accounts by citizens.
Explaining further, he observed: �Our laws allow both residents and non-residents to operate foreign exchange accounts. Any individual or corporate body that operates such an account can easily convert cedis to dollars and pay these monies into the foreign account. Many people have built huge dollar deposits in bank accounts.�
The Governor revealed that the share of foreign currency deposits to total deposits in the banking system increased from 27.9 percent in April 2010 to 28.2 percent in April 2011 and further increased to 31.8 percent in April, this year, stressing that some banks have more foreign currency deposits than domestic currency in their total deposits.
Dollarization is characterized by the tendency of providers of goods and services to price in foreign exchange and in many instances, receive payment in foreign currency. These usually occur in the purchase of cars, payment of school fees, mortgage loans, rental payments, airline tickets, among others.
Service providers quote exchange rates that are significantly off-market and such fringe rates trickle down onto the market and become benchmark fees, which unduly influence market rates.
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