speech delivered at graphic business / stanbic breakfast meeting by dr ernest addison governor, bank of ghana at at labadi beach hotel on tuesday, april 23, 2019 introduction 1. ladies and gentlemen, let me begin by thanking graphic business and stanbic bank for the opportunity to speak on the topic : " achieving sustainable exchange rate : our options ” this topic is timely — coming at a time that we have successfully emerged out of a sudden bout of volatility in the exchange rate, which generated a lot of debate domestically and also externally. it is my expectation that my brief remarks and subsequently discussions will shape the narrative on currency and exchange rate management in the context of a small open commodity dependent economy that has adopted a flexible exchange rate regime to underpin the conduct of monetary policy. 2. the recent sharp movements in the exchange rate of the cedi generated considerable debate on the options that we have as a country to deal with the seasonal bouts of depreciation in a more sustainable way. before i jump into discussing the underlying causes of these sudden episodes of sharp currency depreciation, allow me to first put the key issues into context. 3. first and foremost, i think what we need to understand is that the exchange rate reflects a price. and, as is the case with all prices for goods and services in the economy, the exchange rate will change and respond to the dynamics of the economy and will always be subject to the dynamics of demand and supply. as a country, we have adopted a flexible exchange rate regime, which has served us well in the past and continues to do so under the bank ’ s inflation targeting monetary policy framework. 4. looking at the history, the flexible exchange rate regime has served ghana well, given the structural characteristics of the ghanaian economy. i am sure there are some schools of thought that harbour the idea of ghana pegging the cedi to one of the major trading currencies to achieve some stability. whilst this might sound appealing, empirical evidence, including analytical work by the imf shows that growth has been more robust in countries with flexible exchange rate regime than in countries with fixed exchange rate regimes. 5. as we all know, ghana ’ s economy is import dependent, hence the existence of persistent foreign exchange demand pressures by importers. in addition to these huge demand pressures, the seasonal repatriation of profits and dividends foreignowned companies reflects in significant outflow of resources out of the services and income accounts, exerting additional pressures on the

, there are some concerns to us at the bank of ghana like the persistently high level of npl ratios compared to other peer countries. as at june 2013, the npl ratio was 12. 8, down from 13. 2 in june 2012. although the rates are on the downward trend, they are still high and we are taking steps to encourage banks to write - off long outstanding “ loss ” accounts with 100 % provisioning that tend to overstate the true npl level. for instance, when we account for the loss category, the npl ratio as at june 2013, declined to 4. 7 which compares favourably with prevailing npl levels in other peer countries. 11. on the other hand, there is also the need to apply strict provisioning rules on overdraft facilities which are more prone to “ ever - greening ” than ordinary term loans. other issues are : the build - up of unclaimed deposit balances or dormant accounts on banks ’ books ; concentration risk on both sides of the balance sheet – large loan exposures and reliance on large deposits ; the need for transparent regulatory issuances on such issues as mergers & acquisitions, internal controls, and external auditors ; and finally the need to update manual of accounts and reposting requirements. 12. the bank of ghana took another major step to enhance transparency in the setting of lending rates in the industry. the new base rate model which seeks to ensure transparency and uniformity in loan pricing within the banking industry, became operational in july 2013. as per the directive, banks have fully complied with the new framework and there are positive indications that on the average, base rates have declined by about 3 pct in the banking industry. this new initiative, together with the credit bureau system and the collateral registry should help improve the environment for lending and further help lower npls in the banking industry. 13. mr. chairman, permit me to touch on a matter that is sensitive to both the industry players and the bank of ghana that is capital requirements. developments in the macroeconomic front have necessitated the need for the bank of ghana to review the minimum capital requirements for new industry entrants. in this regard, the minimum paid - capital for major banks have been revised from gh¢60 million to gh¢120. 0 million while that of nbfis increases from gh¢7. 0 million to gh¢15. 0 million. that of the rural banks have been upped to