The Bank of Ghana (BoG) has announced a Foreign Exchange Forward Auction is up for the second quarter of the year.
The Central bank projects to sell US$350million in foreign exchange auctions to authorized dealers in a bid to shore up the cedi.
A foreign exchange (FX) auction is a monetary policy instrument through which the central bank sells or buys foreign currency on the interbank FX market.
This US$350million sale is basically the BoG pumping dollars into the system by making it available to outlets including forex bureaus so that the pressure on the cedi which has been depreciating will reduce.
Thanks to the Akufo-Addo government’s huge borrowing, the country’s debt is now out of the roof.
As a result, investors are apprehensive that if they lend any more to Ghana, the country will likely not be able to pay back. This has led to a shortage of foreign currency, especially dollars.
And Ghana imports most of the things the country uses.
Lack of dollars, therefore, means it has become more difficult to import. This is what has driven prices out of the roof and forced up inflation.
The BoG is trying to mitigate the situation by pumping US$350million into the system.
It says bids were invited as per the prescribed format to purchase the United States dollars against Ghana cedis, separately on each auction date.
Some $150 million is expected to be sold in May 2022, whilst $100 million each will be sold in April 2022 and June 2022 respectively.
According to the BoG, it will publish an auction calendar for the Foreign Exchange Forward Auction quarterly.