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The Bank of Ghana is putting the activities of forex bureau operators in its monitoring radar for possible sanctions and license withdrawal. Suleiman Mustapha asks why? The Bank of Ghana has threatened to impose severe sanctions including license withdrawal of forex bureau operators who accept deposits and do large foreign exchange transactions. Central Bank Governor and Chairman of the Monetary Policy Committee (MPC) of the Bank of Ghana, Mr Kwesi Amissah-Arthur has on the sidelines of an MPC news conference in Accra hinted some forex bureau operators are now accepting deposits and doing large foreign exchange transactions. The bank is therefore setting out measures to monitor the activities of forex bureau operators in a bid to stem the rising spate of dollarization of the national economy. �Yes we are worried that some of the forex bureau operators now accept deposits like the normal banks and transact large volumes of foreign exchange business�. �They are part of the problem and we will soon be rolling out tough measures to stem their illegal activities�, the Governor said. The Bank of Ghana is even more worried of the growing trend of dollarization, which he partly blamed on the activities of forex bureau operators. According to the Governor, the central bank will continuously be reviewing the books and constantly monitor the activities of forex bureau operators for possible sanction in breach of the country�s foreign exchange rules. �It is our view that this will contribute to restoring confidence in the cedi� he said, adding that �the Bank will issue the necessary notices to this effect in due course�. �They are supposed to do spot transaction of the small foreign currency, which does not require having to go to the commercial banks to exchange�. �But what we have observed is that some of them are accepting deposits and moving large volumes of foreign exchange around�, he added. The Bank of Ghana has mopped up GH�1.2 billion in excess liquidity from the system in a bid to stem the exchange rate pressure and reduce demand for dollars. In a move to halt the growing trend of �dollarization� and stabilize the cedi, the Central Bank is also reviewing the currency composition of the reserve requirements of commercial banks. Dollarization is characterized by a tendency for businesses to sell their goods and services in foreign currencies, particularly, dollars. The service providers quote exchange rates that are significantly off-market. The fringe exchange rates trickle down into the market and become benchmark rates, unduly influencing market rates. The situation has fuelled price increases in the country and led the Bank of Ghana to tighten monetary policy, alter bank reserve requirements and reintroduce several bonds. �The committee notes that the measures have begun to take effect. Increase in the policy rate have led to upward adjustments in rates of money markets instruments and improve the attractiveness of cedi assets compared to foreign currency assets�, Mr Amissah-Arthur said. According to the Governor, though the Bank of Ghana was not considering abolishing the operation of foreign exchange accounts by citizens, it would move to restore the pre-eminence of the cedi in domestic transactions, which required strict adherence to the provisions of the Foreign Exchange Act 2006 (Act 723) and the accompanying regulations. The Governor was worried about the large dollar deposits in commercial bank accounts, which he said had significantly contributed to the exchange rate pressure. At the moment, the share of foreign currency deposits to total deposits in the banking system has increased from 27.9 per cent in April 2010 to 28.2 per cent in April 2011 and further to 31.8 per cent in April this year. This means that some commercial banks have more foreign currency deposits than domestic currency in their total deposit. The Bank of Ghana feared that those banks could be importing large volumes of foreign currency to service the needs of their clients. During the first five months of the year, the cedi depreciated cumulatively by 15.1 per cent against the US dollar, compared to 1.9 per cent depreciation in the same period of 2011. In recent weeks however, the pace of depreciation of the cedi has moderated as a result of the measures introduced to restore stability. The real effective exchange rate depreciated by 6.8 per cent in January � April 2012, compared with a real appreciation of 5.9 per cent in the same period of 2011. But Governor Amissah-Arthur assured Ghanaians that the end of the cedi fall was in sight.