Cedi Performance: Cedi will stabilize if Ghana earns significant foreign exchange - Report
The Market Place with Beverly Broohm (3-10-23)
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NewsTranscript
00:00 to the marketplace, coming up Ghana's city
00:02 to weaken marginally this week following
00:05 increased domestic demand and the strengthening of the US
00:08 dollar.
00:08 And government defaults on payment
00:14 of pension contributions from October last year
00:17 to May 2023.
00:19 But the sector regulator insists steps
00:21 are being taken to address this challenge.
00:23 And later on, on the bullet in Ghana
00:28 can end significant foreign exchange
00:30 from international remittances, an opportunity
00:33 that will help stabilize the city in the medium.
00:36 More from a report shortly.
00:38 My name is Beverly Broome.
00:42 Please stay for details.
00:43 [MUSIC PLAYING]
00:47 [MUSIC PLAYING]
00:50 Thanks for choosing us.
01:07 Now, a look at our stories now.
01:09 The Ghana city is expected to weaken this week
01:12 following increased domestic demand and the strengthening
01:15 of the US dollar.
01:16 This is coming after the local currency last week
01:19 lost marginally against the American Green Bank.
01:22 Here's more in this Business Desk report.
01:26 The city tumbled against the dollar
01:28 last week as demand pressures continued
01:31 to build up against the Bank of Ghana's foreign exchange
01:34 supports.
01:35 The central bank held its biweekly foreign exchange
01:38 auction for bulk oil distributing companies
01:42 and provided $20 million.
01:43 Additionally, the central bank was
01:45 active on the spot market, providing about $2 million
01:49 in support to tame demand.
01:51 However, these foreign exchange provisions
01:54 could not hold up the city against the dollar.
01:57 Nonetheless, the local units remained stable versus the euro
02:00 but grew stronger against the pound on the retail market.
02:04 Meanwhile, analysts believe that disbursement
02:07 of the Cocoa syndication loan and the possible inflows
02:10 from the economic credit facility
02:12 with the International Monetary Fund
02:14 were pushing the city in the near term.
02:16 So far this year, the city has lost about 11.4%
02:21 to the dollar in the retail market.
02:23 Now, a report by banking consultant Dr. Richmond
02:36 Ituahine and his associates has revealed
02:38 that foreign exchange earnings from international remittances
02:41 could help reduce the country's current accounts
02:44 deficit and balance of payment and ultimately stabilize
02:48 the city in the medium term.
02:51 It is therefore urging the Ministry of Finance
02:53 and the Bank of Ghana to ensure that money transfer
02:56 companies and financial technology companies deposit
02:59 into the Bank of Ghana's account or authorize
03:02 dealing commercial banks with all foreign exchange accrued
03:05 as it was previously done in the early '20s.
03:09 The report also wants the Bank of Ghana
03:11 to improve on its remittances data
03:13 since it has occasionally not tallied
03:16 with that of the World Bank.
03:17 Joining us on Zoom is the lead researcher,
03:21 Dr. Richmond Ituahine, who also doubles
03:24 as a banking consultant.
03:25 Good afternoon, Doc.
03:27 Thank you so much for your time here on Marketplace.
03:30 Tell us how the country can leverage remittances
03:33 to enhance its macroeconomic fundamentals.
03:38 Thank you very much.
03:39 I mean, in the beginning statement,
03:41 you made a very good analysis that the city has tumbled.
03:45 It's all tumbling because the supply and demands,
03:49 the differences between the supplier and demands.
03:52 Unfortunately, other jurisdictions have tapped
03:55 on remittances to balance the book.
03:58 A typical case is Bangladesh, even Sri Lanka.
04:03 It depends so much on these remittances,
04:05 which is immigrant remittances.
04:08 And it has helped the countries like Bangladesh to stabilize.
04:13 And I believe that if should Ghana adopt the model
04:17 that we have with Bangladesh or Jordan,
04:19 and even other jurisdiction in South Asia,
04:22 we'll be able to bring in more to be able to cushion
04:26 the currency which has been tumbling all the time.
04:30 Because the data shows that even from the World Bank,
04:33 from the Bank of Ghana data,
04:36 the remittances are far more exceedingly above
04:39 than even coco or gold.
04:42 Last year, coco was $863 million.
04:45 Remittances according to Bank of Ghana data was 2.3 billion,
04:51 which actually came to the other authorized data banks.
04:55 Let alone if you move it further to look at the data
04:58 from World Bank office, we're talking about 4.7 billion,
05:03 which is far more exceedingly than coco, gold,
05:06 and what have you.
05:07 So that is the reason why we need to tackle it
05:10 as if we're going to tackle it to support the currency.
05:15 Unfortunately, the remittances is one is the largest,
05:19 I mean, if you take its largest,
05:21 is bigger than all the inflows that come into the country.
05:24 But we have not made a conscious effort,
05:28 a conscious effort to track and capture
05:31 all these remittances into our balance of payment position.
05:36 If we do that, I believe Ghana will stand tall
05:41 because we are the second largest in the sub-region.
05:44 If you take Nigeria, Ghana is the next
05:47 in the whole of Sub-Saharan Africa.
05:51 That is what we are saying in our paper.
05:53 We are saying that we should make a conscious effort
05:56 to track and trace all these remittances
05:59 that we used to do in the 80s and in the 90s
06:02 and the early 2000s.
06:04 - That remittances have become a major contributor
06:09 to our foreign exchange earnings
06:11 as Ghana has consistently been among the top five
06:15 on the African continent.
06:16 What should we do to rope in more foreign exchange earnings
06:20 considering the huge number of Ghanaians in the diaspora?
06:23 - You see, we should adopt the model in the Bangladeshi,
06:29 at least India, Bangladesh, and Sri Lanka.
06:32 The government make conscious effort.
06:34 We're calling diaspora investment.
06:37 The government make a conscious effort
06:39 to see, to attract those who are in diaspora.
06:44 Conscious effort so that they can know that
06:46 they can track the foreign flows to support the economy.
06:51 We haven't been doing that.
06:53 In other jurisdictions, they even organize remittances fair.
06:59 And they go to tell them, when the money comes in,
07:01 we're depositing a special bond for you.
07:04 Meanwhile, you'll benefit from the foreign exchange.
07:07 So to me, if you look at the whole Africa,
07:09 we are third, we are second from Nigeria.
07:13 If we make a conscious effort by the Minister of Finance,
07:16 the Minister for Trade and what do you call them,
07:18 the regional integration and the foreign affairs
07:21 and the tourism people,
07:23 we will be able to help the country
07:27 so much to attract this money to balance,
07:29 to help us the quite consistent depreciation of the city.
07:34 Because it's a source of fund that is easy.
07:37 But unfortunately, we have introduced some bottlenecks in it.
07:42 You know, when you deregulate it
07:45 with the Payment Act, Service Act 2019,
07:50 what it means is that now we have certain institutions
07:54 playing in the game,
07:56 but they do not account for their remittances.
08:00 Let me give you a typical example.
08:02 Yesterday, my wife received some pounds from the daughter.
08:07 You know, all that she sat in the house,
08:09 you account, you have it, you have the boomer,
08:12 so much cities.
08:13 But who do track this foreign currency?
08:17 That is where the problem is.
08:19 Previously, when we have the money grams,
08:22 the Western Union, the vigos,
08:25 all these people had to report how much,
08:28 and then the government would give you,
08:30 Bank of Ghana will sign an agreement
08:32 with you to pay you a commission.
08:34 But currently, what is happening is that
08:36 the foreign currency is not coming.
08:38 They only churning the city to us.
08:40 So we are not benefiting the entirety
08:43 of the foreign exchange,
08:44 which is why I'm asking government,
08:47 I'm asking Bank of Ghana to begin to take a critical look
08:51 about these discrepancies.
08:54 It accounts for the differences
08:55 between the World Bank data.
08:57 Last year, World Bank data, 2022,
09:00 the remittances to Ghana was 4.7 billion.
09:03 If you go to the Bank of Ghana authorized dealer banks,
09:06 you're only 2.3.
09:07 So currently, the 2 billion and it's 4.7,
09:11 there's a difference of about 2.4 billion.
09:13 Where does that dollar goes?
09:15 So that is why we are trying to say that
09:17 we should address these policy issues,
09:21 especially the data capturing,
09:23 the data dissemination,
09:25 and the way information is done
09:28 so that we could, as a country,
09:30 benefit as other countries like Bangladesh,
09:33 Singapore,
09:34 no, Sri Lanka, India,
09:37 are all doing.
09:39 So that is why we are saying that this paper
09:42 should be taking a critical look
09:44 so that we can look at the bottlenecks and improve it,
09:47 because it is going to continually be a source of income.
09:52 Let me give you one example.
09:53 I experienced when I went to Bangladesh.
09:56 They have so many people in the Arab countries,
09:59 the Gulf state,
10:01 and I tell you,
10:02 they remit as much as,
10:04 at times, 22 billion in a year.
10:06 So if we can even get 10 billion a year,
10:10 I'm sure cocoa would step aside,
10:14 mining will step aside,
10:16 and the remittances alone,
10:17 if we are well-coordinated and structured,
10:19 can help the Ghanaian economy
10:22 to support imports,
10:24 support payment of bills outside,
10:26 and all these things.
10:28 So that is why we have put up this paper
10:30 so that people can read and appreciate that
10:33 there is still more room for improvement.
10:36 - Right, Doc,
10:36 but what policy issues should be addressed
10:40 to maximize the impact of remittances on savings,
10:44 investments, poverty reduction, amongst others?
10:50 - Currently, World Bank data tells me that 4.7,
10:54 and we only record 2.3.
10:56 So definitely,
10:57 it is something to do with the data capturing.
10:59 - Right.
11:00 - Data capturing.
11:01 Because if you're not capturing the quality data,
11:05 then there will always be discrepancies.
11:07 Because if you license all these fintech,
11:10 the MTFs,
11:11 especially the MTF, the border phone,
11:14 those who are supposed to get a chunk
11:16 of the foreign currency,
11:17 but at the end of the day,
11:19 they only look at the city.
11:20 They don't look at,
11:21 nobody is tracking the foreign currency component,
11:26 which is a very dangerous,
11:29 because previously,
11:30 from my experience,
11:32 in the, I think, 2008, 2009,
11:35 when I used to be a dealer of a bank, Treasurer,
11:37 we used to buy foreign currency from ADB,
11:41 at that time, Western Union.
11:43 They were the source of it.
11:44 And we could buy as much as $25 million
11:47 to support oil imports.
11:49 And it didn't impact on the Google.
11:52 So we can always, all the time, make money.
11:55 And I'm saying that,
11:56 if we should look at the policy issues,
11:58 like data not comparing with World Bank,
12:01 and we address the systems,
12:04 especially those in fintech,
12:06 if they are in,
12:07 or those in the telecos,
12:08 if they are in it,
12:09 who is taking care of the foreign currency?
12:13 Because the question is that,
12:14 CD is Ghanaian currency,
12:16 but the dollar is foreign.
12:18 So somebody should take the foreign currency,
12:20 give the CD,
12:21 and you will be paid a certain commission
12:23 of what you have done.
12:24 And they repatriate the difference
12:27 to either Bank of Ghana,
12:29 or to the authorized dealer bank.
12:30 This is only one of the policy issues.
12:33 There are a couple of them.
12:34 There are about 10 of them that needs to be addressed.
12:37 If we address it,
12:38 especially considering the Foreign Exchange Act,
12:41 and let me repeat,
12:43 the Foreign Exchange Act 2006, 723,
12:47 it says clearly, categorically,
12:49 nobody has the right to hold foreign exchange,
12:53 except the dealer bank or Bank of Ghana.
12:57 Let me repeat,
12:57 except Bank of Ghana,
13:00 or the authorized dealer banks,
13:01 the 23 authorized dealer banks.
13:03 So if anybody is holding a foreign currency,
13:06 as against the Foreign Exchange Act,
13:08 then we need to ask ourselves,
13:11 what are we doing to ourselves?
13:13 So that is the reason why I'm saying
13:14 there are a lot of policy issues in the paper
13:17 that we need to address.
13:18 And if we're able to address it,
13:20 with the Foreign,
13:24 what do you call it?
13:24 The Ministry of Foreign and Regional Integration,
13:27 Ministry of Finance,
13:28 the Bank of Ghana,
13:29 all getting involved,
13:30 going out,
13:31 organizing a fest.
13:34 Bangladesh, we have a remittance fest,
13:37 diaspora fest.
13:38 And we go there and a lot of people come in.
13:41 In New York, Ghanians are there.
13:43 In London, plenty.
13:44 Germany, Holland.
13:46 If we organize consciously, make an effort,
13:48 next two years, three years,
13:50 all these going to IMF and borrowing and borrowing,
13:53 could be a thing of the past,
13:55 because remittances is a stable,
13:58 stable, stable source of currency.
14:01 - Thank you so much, Dr. Richmond Echiahine.
14:04 He's a banking consultant,
14:06 for your time here on the Marketplace.
14:08 Now, government has defaulted
14:09 on payment of pension contributions
14:11 for public sector workers,
14:13 from October last year to May, 2023.
14:17 This was contained
14:18 in the Financial Stability Review Report for 2022.
14:23 This is still Marketplace on the JOY News Channel.
14:26 Let's cross over to the Occupy BOG protest grounds,
14:30 and bring you some updates from there.
14:32 (trumpet music)
14:37 (crowd shouting)
14:40 (crowd shouting)
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14:48 (upbeat music)
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17:16 (crowd shouting)
17:18 (crowd shouting)
17:37 (crowd shouting)
17:40 (upbeat music)
18:00 (upbeat music)
18:02 - We seem to be experiencing some connection issues there,
18:10 but we'll definitely take you back
18:12 to the Occupy BOG protest,
18:14 and listen to MP for Ningopampam,
18:17 Sam George, addressing the crowd.
18:19 This is still Marketplace here on JOY News Channel
18:22 with me, Beverly Broome.
18:23 Now, government has defaulted on payment
18:25 of pension contributions for public sector workers
18:29 from October last year to May 2023.
18:32 This was contained in the Financial Stability Review Report
18:35 for 2022.
18:37 My colleague, George Riafe, has the rest of the story.
18:40 - The default has affected tier one and two
18:44 of contributions of workers over the past seven months,
18:48 ending May this year.
18:49 This should mean that when it comes to the mandatory
18:52 tier one, smith contributions of 13% of workers' salary,
18:56 payments have delayed.
18:58 Government has also had challenges
19:00 in meeting the tier two contributions,
19:02 which is 5% deduction of workers' basic salary
19:06 through a privately money scheme.
19:07 The report put together
19:09 by the National Pensions Regulatory Authority
19:12 and captured in the Bank of Ghana's
19:14 Financial Stability Report,
19:16 however, showed that there were some payments made
19:19 in March this year.
19:20 However, this covered contributions up to September 2022.
19:26 The National Pensions Regulatory Authority,
19:29 as ever, promised that it will continue to negotiate
19:32 with government on the payment of outstanding contributions
19:35 and timely payment of subsequent ones.
19:38 Meanwhile, industry data ending March this year
19:41 showed that the scheme posted some negative return.
19:45 However, the regulator believes that these indicators
19:48 should improve when the default in contribution payments
19:51 are settled by government.
19:56 Let's cross over again to the occupied BOG protest grounds
19:59 and listen to MP for Ningo Pampram, Sam George.
20:03 (crowd singing)
20:06 (crowd singing)
20:10 (crowd singing)
20:12 (crowd singing)
20:19 - Let the revolution happen today at the Bank of...
20:35 (crowd singing)
20:38 - Thank you very much.
20:41 A message from the minority chief
20:46 with Honorable Governors, Kwame Nkodua.
20:53 (crowd singing)
20:56 - Thank you.
20:57 - Come on.
21:01 (crowd singing)
21:04 - You will see a healthcare project
21:18 that has saved so many lives.
21:21 And then you see a hoarding.
21:22 The briefing sheet you see here,
21:25 that is a fail too of this hospital
21:28 that is supposed to save our lives.
21:31 Since the NPP came to government,
21:33 they decided to abandon this project.
21:36 And right here, right here.
21:39 La people can get their 60 million euro hospital.
21:52 They have stopped it.
21:54 They now say Lagenda Hospital is now at the Agenda 111.
21:58 Go there now, you'll see that there's no contract there.
22:02 The 250 million dollar that is building this
22:05 can be for Agenda 111, not even Lagenda Hospital.
22:09 This is how wicked Dr. Mounir and President Bufano is.
22:21 - Cheap compounds across the country.
22:24 Over 3,000 cheap compounds.
22:26 Over 3,000 EIR,
22:27 The Oakland building was put up in 1917 something.
22:38 It's still the building they use.
22:41 Today, Akufo-Addo and his finance minister are saying
22:45 that they need a bank of Ghana headquarters
22:48 that is the city.
22:49 Can you imagine?
22:51 You are broke, yet you want to have a bank of Ghana building
22:54 that is nicer than the Bank of England building.
22:56 My brother says this,
23:00 this building will not finish before NDC comes about.
23:04 I would expect the next NDC government,
23:08 hopefully President Mohammed,
23:10 will prioritize a two of these projects than this one.
23:13 The Bank of Ghana, they told us that
23:16 if they don't do this, if an earthquake happens,
23:19 the Bank of Ghana, the current one will collapse.
23:21 If you are given an opportunity to save a building
23:25 during an earthquake,
23:26 would you be talking about Bank of Ghana?
23:28 You would go to maternity block and call a boom.
23:31 Which is almost collapsing, the patients are in there.
23:34 I have a final word.
23:36 Dr. Boumia is saying it is possible.
23:38 The only thing that is possible is that
23:40 corruption will stop in 2025.
23:42 That nepotism will stop in 2025.
23:47 If it is in their mind that what they did in 2020,
23:51 when they killed over eight of our compatriots during election,
23:55 when even they are accused in Africa
23:57 that a chicken was not killed,
23:59 that during election,
24:00 in time around Ghana,
24:03 if we are doing an election,
24:07 call yourself police, military, or vigilante of NDP,
24:12 if you touch anybody at a police station,
24:14 there will be an immediate reaction.
24:16 (crowd shouting)
24:18 If you come to my house,
24:20 if you come to my house and slap my mother,
24:23 I will not go and report you to the police.
24:25 I will deal with you immediately.
24:27 So let it be known today,
24:28 in 2024,
24:31 there will be an instant justice.
24:36 Because we waited for seven years
24:38 and not a single person who was killed and got justice.
24:42 Let us be united.
24:44 We shall continue.
24:45 (crowd shouting)
24:48 - On the right, National Theater.
24:50 (crowd shouting)
24:53 (upbeat music)
25:05 (car horn honking)
25:07 (upbeat music)
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