The Ghana Securities Industry Association has raised red flags over government’s intentions to raise another dollar bond after a maiden one proved successful with government raising 94.6 million dollars.

The association considers the move a threat to the relative stability attained by the Cedi. Some Commercial Banks have also expressed worry, saying government is competing with them for dollars locally.

Speaking to Starr Business, a council member of the Association, Wintson Nelson Jnr. said government must tread cautiously.

“I think it’s a bit contrarian because the government should be the one who should rather be defending the cedi instead of issuing currency rates in foreign currency, I don’t think it’s a very common thing in this part of the world”.

He added: “I think the theory has always been that Ghanaians will hold foreign currency anyway; they keep it in their homes, under their pillows some will keep in banks, some will be traded on the black market et cetera. So why don’t we as government create a product that will tap into this pool.”

As part of measures to ensure the stability of the Cedi, the central bank directed all commercial banks not to offer interest on dollar deposits.

With the recent moves by government, the banks fear dollar deposits will run out as the dollar bonds will offer meaningful interest.

Mr. Nelson Jnr added that “depreciation is a problem and most central banks are trying to manage by how much the currency will depreciate. One way for a currency to depreciate is what we call; sell the Cedi to buy dollars. In this case when you start issuing domestic debts in dollars, literally what you are saying is that sell more Cedis to buy dollars; and you will probably start to feel it in the currencies stability.”

Meanwhile the Finance minister has dispelled the fears of banks. According to Seth Tekper, there is no justification for commercial banks to panic over the move since the policy will rather benefit the banks.

“Government policy has benefited the banks, is the reverse of what the banks are talking about now, what they are saying here is that we are mopping dollars from their deposits and it will lead to competition by government. But you saw the reverse where government action also benefited the banks when about 500 million dollars was used to pay domestic debt,” he said.

Source: Ghana/ Owusu Amankwaah


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