19 June 2014

Ghana: BOG Review of Foreign Exchange Rules Takes Effect

The revision of the Bank of Ghana's (BoG's) rules on foreign exchange operations to enhance transparency in the foreign exchange market has taken effect this week.

To this end, the central bank said the 60-day mandatory repatriation of export proceeds had been reversed and aligned to the terms agreed between trading parties. Likewise, it stated that the 5-day mandatory conversion of export receipts into Ghana cedis had been reversed. This means that exporters can now retain up to 60 percent of their export receipts in their Foreign Exchange Accounts (FEAs), and convert 40 percent of the proceeds into Ghana cedis at market rates within 15 days.

In a notice issued to all the banks and general public and signed by the BoG Secretary, Mrs. Caroline Otoo, the regulator said: "Exporters of services such as hotels, educational institutions, insurance companies and others may receive payment in foreign currency from non-residents". It indicated that the service providers may retain up to 60 percent of their receipts in their FEA and 40 percent shall be converted at market rates within 15 days in accordance with the paragraph above, adding that the service providers shall submit quarterly returns to the Treasury Department of the Bank of Ghana.

"With the 60 percent retention granted to exporters, the margin account will no longer be required for such exporters. "However, importers may continue to use the margin account (operated by the banks on their behalf) to build up foreign exchange to be used exclusively for the purpose for which it is opened", the BoG stated. According to the central bank, cash withdrawals from the Foreign Currency Account (FCA) and FEA shall be permitted up to a limit of $1,000 or its equivalent per transaction in foreign currency. "This is without prejudice to the limit of $10,000 withdrawal per travel, and the

$10,000 annual transfer without documentation. The use of cheques on FCA and FEA is still not allowed". On the other hand, the threshold for transfers abroad by importers without initially submitting documentation to their bankers has been increased from $25,000 to $50,000. Adding: "Where documentation in respect of a transfer remains outstanding, any subsequent import transaction by the importer, irrespective of value, can only be made on prior provision of documentation required for the current import transaction".

The BoG noted that in order to promote the use of cards and assist importers who purchase goods from multiple sources abroad, the limit on electronic cards is increased from $10,000 up to $50,000 to meet legitimate needs of importers. This shall be subject to documentation conditions as indicated in the paragraph above. Foreign currency loans, it said may be granted by resident banks for international trade-related transactions, whether or not the borrower is a foreign exchange earner. The BoG stated categorically: "Undrawn balances on foreign currency denominated facilities may now be drawn in the original currency.

Transfers from abroad which do not constitute payment for exports (unrequited transfers), such as transfers to diplomatic missions, international organizations, businesses etc, are not subject to the mandatory conversion and retention arrangements in the paragraph above". Such funds may be held as forex balances and utilized at the discretion of recipients. All exporters shall complete the Certificate of Origin issued by the Ghana Chamber of Commerce for all export transactions, according to the central bank.

The Bank of Ghana emphasized that: "foreign exchange is freely transferable to meet legitimate external payment obligations. The cedi remains the sole legal tender in Ghana. Therefore pricing, advertising, invoicing, receiving and making payments for goods and services should be done in Ghana cedi, unless otherwise authorized by the Bank of Ghana. Special cases, such as Mining and Other Support Services, will be considered on case-by-case basis".

The BoG, therefore, warned: "Failure to comply with the provisions of this Notice shall attract sanctions under Sections 15(4) and 29 of the Foreign Exchange Act, 2006 (Act 723). The penalties include pecuniary sanctions, jail terms, suspension and revocation of the operating licence as applicable". Banks and the general public are hereby advised to note the above and be guided accordingly. It, however, maintains that any existing measure that is not amended by this notice shall remain in force.

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