Excessive or Necessary? Governor Clarifies “Misconception” About FX Market Interventions at WB/IMF Meeting

Amid the controversies and debates surrounding the operations of the Central Bank in the country’s forex market (FX), the governor of the Bank of Ghana (BoG), Dr. Johnson Asiama, has clarified what can be described as recent misconceptions about the central bank’s activities in the foreign exchange (forex) market.

Dr. Asiama insists that any activity undertaken by the BoG in the forex market was not excessive interventions but prudent steps to stabilize the cedi during a period of sharp market volatility.

Speaking at the Governor Talks session during the ongoing World Bank/IMF Annual Meetings, Dr. Asiama explained that the BoG’s recent operations were aimed at smoothing excessive volatilities in the market rather than manipulating exchange rates to create an artificially strong cedi.

Explaining what caused the need for what appeared to be an excessive market support, the Governor revealed that between the second and third quarters of the year, Ghana experienced a series of “lumpy payments”. These were unusually large outflows that temporarily strained the foreign exchange market.

These included billions of dollars in arrears owed to Independent Power Producers (IPPs) and payments to domestic bondholders who opted to exit their holdings after the cedi’s brief appreciation.

“Essentially, what we do is to smooth excessive volatilities. And that is what our framework has been about. Yes, there were allegations about whether we’re intervening in the markets, but that was not exactly the case,” he narrated.

He further explained that, “between the second and the third quarter, we had to do a number of lumpy payments. There were all these large arrears in payments to some of the IPPs. These were billions of US dollars. And then also, we had some of the domestic debt-affected bondholders that wanted to exit. They felt that because the currency had appreciated, it was the right time to take up their investments. We had to allow them to go. And so, we did a lot of lumpy payments between July and August, thereabout.”

At the same time, the central bank observed a drop in remittance inflows, which is one of Ghana’s major sources of foreign exchange, typically bringing in over $6 billion annually.

This double squeeze, large outflows, and declining inflows caused liquidity pressures in the interbank and forex markets.

“The interbank market had dried up during that time,” Dr. Asiama said. “And so, the central bank needed to provide support.”

He emphasized that these actions were consistent with the BoG’s mandate to ensure orderly market conditions and maintain macroeconomic stability.

Economists note that central banks often step in during such periods to prevent panic and restore confidence, especially when the supply of foreign exchange temporarily tightens.

By clarifying the issue, Dr. Asiama sought to assure the market and the public that the Bank of Ghana remains committed to transparency and disciplined monetary management, not artificial exchange rate control.

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