BoG propping up cedi to fake stability – Kwadwo Poku

The Executive Director of the Institute for Energy Policies and Research (INSTEPR), Kwadwo Poku, has accused the Bank of Ghana (BoG) of deliberately manipulating the exchange rate of the cedi to create an impression of stability and temporarily reduce fuel prices.

Speaking in an interview, Mr. Poku argued that the recent drop in petroleum product prices is not the result of improved economic fundamentals but rather a coordinated intervention by the central bank and the Ministry of Finance.

“It has never been the case where the Bank of Ghana is doing the semantics they are doing to forcefully keep the dollar at a certain price when, in reality, we know they are using a lot of resources to do that,” he said.

According to the Chamber of Oil Marketing Companies (COoMAC), the latest petroleum pricing window, effective November 1, will see petrol prices fall by about 5.2% and diesel prices drop by between 6% and 8%.

Mr. Poku, however, believes this decline will be short-lived.

He warned that maintaining the cedi below its true market value, which he estimates to be between GH¢12.40 and GH¢12.50 per US dollar, is unsustainable and could further widen Ghana’s fiscal deficit.

“For me, the cost of what the Bank of Ghana and the Ministry of Finance are incurring is huge because already we have a $21 billion hole in the budget due to this currency situation,” he explained.

He added that keeping the exchange rate artificially low also affects government revenue collection, particularly at the ports, since import duties are calculated based on foreign exchange values.

“Since the FX value has been made low, it’s also affecting GRA’s receivables from the ports,” he noted, adding that the Ghana Revenue Authority (GRA) is struggling to meet its revenue targets because of this policy.

Mr. Poku further cautioned that with the winter season approaching, international fuel prices are likely to rise again, which could put additional pressure on the cedi and reverse the recent price reductions at the pump.

He urged the government to adopt a more transparent approach to managing the exchange rate and fuel pricing mechanism to prevent future fiscal shocks and restore investor confidence.