Governor of the Bank of Ghana (BoG), Dr. Johnson Asiama has allayed fears that the conceived new Foreign Exchange Act will introduce controls and take away the flexibility of the market.
Dr. Johnson Asiamah says such fears are misplaced as the Central Bank has no intention of introducing or imposing a fixed exchange rate regime. The fear stems from the announcement of the intention of the new governor to replace the old Foreign Exchange Act with a new act.
The old Act, passed on 2006, the governor says has outlived its usefulness considering the new developments and trends in the market. The emergence of fintechs and virtual currencies, which are not captured in the Act, Dr. Asiama says makes it imperative for an all-new and encompassing Act.
Contrary to the fears, Dr. Asiamah, who was speaking in an interview with US-based Bloomberg, emphasized that the new law will be designed to rather enhance transparency, provide clarity to the market participants, and align the legal framework with disruptions in the financial sector.
“It’s an act that was passed in 2006, thereabout. A lot has happened since then. There have been several notices that have been published since then. There have been new developments, fintechs, virtual assets, what have you. The idea is to have a new law that is able to cover all these new developments,” he indicated.
He further indicated that the law is in no way seeking to reinstate restrictive foreign exchange measures. Dr. Asiama reaffirmed Ghana’s commitment to a flexible exchange rate regime, stressing that the central bank’s goal remains the avoidance of excessive volatility rather than an artificial stabilization of the currency.
“It’s nothing to do with foreign exchange controls. Not at all. We believe in the market . So the idea is to provide that transparency, to provide that coverage, and to ensure that we are better able to manage the foreign exchange market. Remember our objective is to avoid excessive volatility. Our objective is not to keep the exchange rate fixed. Our objective is to take out excessive volatility,” he clarified.
He says the excessive volatility of the market is very detrimental to the expectations of businesses and hence the need for a consultative approach to craft a new law that works. He further revealed that the market players are the ones clamouring for such a new act and hence the Central Bank is very happy to grant that.
“The excessive volatility that becomes detrimental to the expectations formation, that is what we want to take out. That is what we have been doing in the recent days and recent weeks. That will remain our focus going forward. We will be consulting the stakeholders when we are putting together this act. Nothing to surprise the market at all. The markets are actually asking for it and we are happy to deliver just that,” Dr. Johnson Asiamah told Bloomberg.
Dr. Asiama’s strong stance against a fixed exchange rate regime and his pledge to maintain a flexibility market are expected to calm nerves and continue to bolster confidence in the market.
