Professor Godfred Bokpin of the University of Ghana Business School on Wednesday said the Bank of Ghana’s “excessive” intervention in the foreign exchange market is fuelling multiple exchange rates.
He observed that the multiple rates created a significant discrepancy between interbank exchange rates and the rates offered by foreign exchange bureaux in the market.
The Professor of Finance raised this concern in an exclusive interview with JoyNews, monitored by the Ghana News Agency, in response to a recent caution by the International Monetary Fund to Ghana’s Central Bank, regarding its intervention in the foreign exchange market.
He explained that while market factors of demand and supply should determine the exchange rate, the Bank of Ghana’s dual role as both a regulator and a market player distorted that concept.
“The Bank of Ghana has, to a large extent, an upper hand in terms of control of exchange rates and how the exchange rates spill over into the market,” Prof Bopkin said.
He highlighted the impact of the Central Bank’s intervention, citing considerable differentials.
“If you pick the rate at the bank level, if you want to sell dollars at the bank level, you are likely to get it at probably 10.1, or some are even doing 9.8 or so.
“However, if you look at the other layers of the market, the forex bureaux… their price differential is working up to 20 per cent. In some instances, the data we looked at, we were working close to 25 per cent,” he stated.
Prof. Bokpin gave the percentage rate difference between the interbank rate and the rate provided by the forex bureaux as hovering around 35 per cent.
He emphasised the need for building confidence in the market, stressing that if market players believed the rates were aligned and reflective of true value, they would not seek alternative channels for foreign exchange transactions.
GNA
