CEO of GITFiC calls for implementation of Bilateral Swap Agreement to deal with depreciating cedi
In the wake of the recent persistent free fall of the Ghana cedi, the Chief Executive Officer (CEO) of the Ghana International Trade and Finance Conference – GITFiC, Selasi Koffi Ackom is calling on traders to halt the over reliance on the US dollar for their activities.
Selasi Koffi Ackom made this recommendation on Monday, October 24, 2022 when he was speaking on Spotlight on MX 24 TV with Nuong Faalong.
The CEO explained that although the current depreciation of the cedi against the US dollar is mainly caused by external factors rather than domestic factors, there are means of remedying the situation.
To him, in order to reduce the pressure on the US dollar, traders and importers must be strategic by halting the demand of the dollar and rather opting for the currencies of their main trading partners.
Describing this arrangement as Bilateral Swap Agreement, Selasi Koffi Ackom indicated that the Bank of Ghana can arrange with the Central Banks of Ghana’s major trading partners for their currencies to be bought with Ghana’s cedis.
With this system, he explained traders and importers who for instance trade with China can buy the Chinese currency from the Bank of Ghana with the cedi and also Chinese traders who trade with Ghana can also directly access the Ghana cedi from the Chinese Central Bank.
With this Bilateral Swap Agreement in place, Selasi Koffi Ackom explains that there will not be the need for traders to demand dollars for their transactions hence halting the depreciation of the local currency.
“From where we sit as a typical research institution in trade, finance and logistics & trade finance, we are of the view that these happenings are as a result of external factors much more than domestic factors,” the CEO of GITFiC contended.
“In the technical sense, there is something known as the bilateral swap agreement which in actual sense means several central banking systems engaging. For instance, if you know that your major trading partner is China, and China’s currency is the Chinese Yuan, what you do is that you go to buy the Yuan with your currency.
So let’s say you already know the volume of trade and you know that each year minimally we are doing about $600 million trade transactions with China. So probably, you want to mitigate such external shocks in terms of currency depreciations and its antecedents by saying, by our agreement we have with the Chinese Central Bank , can we go with about 300 million to buy the Yuan back into our system. They will also have the cedi because you have to measure that with the trade volumes between the two countries.
So in times like this where the major trading currency is US Dollar and its appreciating rapidly against the Ghana cedi and its getting to the festive season, your traders will have more choice to still go back to their biggest trading partners.