The Central Bank, after its emergency Monetary Policy Committee (MPC) meeting on Wednesday, August 17, has announced an increment in the primary reserve requirement of banks in the country.
Per the statement issued by the MPC following its emergency meeting, primary reserve requirement of banks has been increased from 12% to 15%.
This marks a sharp increase of 3 percentage points in the reserve requirement of banks.
According to the Central Bank, increment in the reserve requirement of banks will be done in a phased manner with the first increment to take effect on September 1, 2022.
The second and third phases of increment will take place on October 1, 2022 and November 1, 2022 respectively.
Primary reserve requirement refers to the portion of total deposits that banks are required or mandated to keep at the Central Bank.
They serve as a defense against a substantial reduction in liquidity and kept against major unexpected withdrawals.
Aside the increment in the reserve requirement, the Central Bank also revealed plans to begin purchasing foreign exchange particularly dollars, from mining firms and international oil and gas companies in the country.
According to the apex bank, this is to boost the supply of foreign exchange to the economy and effectively strengthen its foreign exchange auctions, particularly to Bulk Oil Distribution Companies (BDCs).
This move by the Central Bank, is expected to stabilise the fast depreciating cedi which has recorded a year-to-date depreciation rate of 25%.
“To boost the supply of foreign exchange to the economy, the Bank of Ghana is working collaboratively with the mining firms, international oil companies, and their bankers to purchase all foreign exchange arising from the voluntary repatriation of export proceeds from mining, and oil and gas companies. This will strengthen the central bank’s foreign exchange auctions,” said the BoG.
Increment in the primary reserve requirement and the purchase of foreign exchange from mining firms and oil and gas companies, the BoG noted, forms additional measures to the increment in its monetary policy rate.
Meanwhile, the Central Bank has raised its monetary policy rate by 300 basis points.
The policy rate on the back of the increment, currently stands at 22% from the previous rate of 19%.