Exchange rate stabilized – BoG Governor to PAC

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Governor of the Bank of Ghana, Dr Ernest Addison, has revealed to the Public Accounts Committee (PAC) of Parliament that there has been a stability in the exchange rate in Ghana.

This he said should be an incentive for businesses to continue pricing in cedis and not dollars. The BoG has banned pricing in dollars in Ghana as a measure of strengthening the cedi.

He warned the general and businesses especially to desist from pricing in dollars saying the central bank will start investigating complaints against some businesses engaged in the practice thereby flouting the BoG’s rule.

Dr Addison reminded the general PAC hearing on Wednesday June 23 that it is illegal for businesses to price in dollars.

Answering questions posed by Member of Parliament for Ningo Prampram , Samuel Nartey George regarding the measures the central bank has taken to tackle persons trading in dollars in Ghana, an action that goes against the BG’s regulation, Dr Addison said : “As you are aware the central bank  has come out very clearly on trying to  declare dollarization illegal and we have gone round trying to stop  people from pricing  and invoicing in US dollars .

“ But what you described  is the situation in which  the school is indexing  its charges  to the exchange rate . They can decide to index their charges  to the consumer price index , that is another way of measuring  what the change in cost of living is.

“And we found out that people are more interested  indexing to the dollar  rather than indexing  to the CPI.

“ I think that if you look at  the stability that we  are seeing in the exchange rate , may be they better be indexing on  the CPI , which if you look at where the inflation rate  is today  at 10.6%, that is much higher than indexation to the dollar.

“That I think it reduces the incentives for dollarization. When you have a stabled currency that is not depreciating very fast , you don’t have widespread dollarization because the incentive is not there.”

He added : “We already said that  we do not encourage  invoicing  in foreign currency . We have already said that  we do not support dollarization , But pricing generally in the economy is  on the basis of  an assessment of conditions  and typically the consumer pricing  index which is the rate of  inflation  is what would normally be used as the benchmark .

“Even for wage adjustments when the labour goes to negotiate with their employers they look at the change in the  cost of living  and use the inflation rate as an adjustment factor . So all that I am saying is that , now that we  have a relatively stable currency  the incentive to index  in the US dollar is not there , but yes it is illegal to be pricing in dollars. It is illegal to invoice in USD , it is illegal to index in USD.”

When his attention was drawn by the lawmaker about some companies still engaged in the practice he said : “We will investigate it”

Source: Laudusiness.com/Ghana

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