Governor of the Bank of Ghana (BoG), Dr Johnson Asiama Pandit, has refuted claims that the central bank manipulated the foreign exchange market, asserting that its recent measures were essential to avert a complete market breakdown.
During discussions with the International Monetary Fund at the ongoing IMF/World Bank Spring Meetings in Washington, D.C., on October 16, Dr Pandit explained that the BoG’s actions between the second and third quarters were prompted by substantial foreign exchange outflows tied to overdue payments and investor withdrawals.
“Yes, there were allegations about whether we were intervening in the market,” he stated. “But that was not exactly the case. Remember, between the second and third quarters, we had to make a number of lump-sum payments. There were all these large arrears in payments to some of the IPPs. These were billions of US dollars.”
He further noted that some local bondholders impacted by the debt restructuring initiative opted to exit the market following the cedi’s appreciation, leading the central bank to accommodate those transactions.
“We had to allow them to go. And so we did a lot of lumpy payments between July and August,” Dr Pandit said. “So you might have seen some bit of that.”
The governor added that the situation was worsened by a short-term drop in remittance inflows, which are among Ghana’s primary sources of foreign currency.
“Remittance inflows are another huge source of FX injection — you are looking at over six billion US dollars per year,” he elaborated. “However, immediately after the currency appreciated, we saw a decline.”
At the peak of the strain, Dr Pandit said the interbank foreign exchange market had nearly stalled, necessitating intervention from the Bank of Ghana.
“The central bank needed to step in and meet all those lumpy payments. The interbank market had dried up during that time, and so the central bank needed to provide that support,” he said. “But I’m happy to say that the interbank FX market has come back.”
He mentioned that the BoG has since instructed mining companies to route their foreign exchange earnings through commercial banks, a strategy that is gradually revitalizing market activity.
“We are beginning to see some pickup in interbank FX market activity,” he observed. “With that, the central bank wouldn’t have to be that present.”
Dr Pandit clarified that gold inflows remain the sole exception to this directive, continuing under the Gold for Reserves scheme.
“To give you an example, as of yesterday, we had committed to make available $150 million,” he said.
“This morning, when I checked, the market had picked up only $90 million, so $60 million automatically goes into our reserves. Same thing Tuesday — we made available 150 million, and the market picked up less than half. So automatically it goes into our reserves.”
He emphasized that the central bank has not overwhelmed the market with dollars or attempted to manipulate exchange rates, but rather acted to preserve equilibrium.
“We do not over-support the markets at all,” he stressed. “All we seek to do is to limit the volatilities in the markets, to ensure that we have that smooth dynamics in the market. And that’s the framework we will maintain going forward.”
Dr Pandit concluded that without the BoG’s prompt action, Ghana’s foreign exchange market would have collapsed, causing severe repercussions for businesses and consumers.
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