By: Franklin ASARE-DONKOH
A Banking Consultant, who doubles as the Chief Executive Officer (CEO) of Universal Capital Management Limited, Dr. Richmond Atuahene, has warned the government against diverting bank reserves to support the operations of COCOBOD.
According to him, proposals for the Bank of Ghana to allocate a portion of the Cash Reserve Ratio (CRR) to support local cocoa purchasing companies will threaten monetary stability
The astute Banking Consultant’s caution comes on the heels of a suggestion made by the CEO of COCOBOD, Dr. Randy Abbey, that two (2) to three (3) percent of bank reserves be redirected to sustain indigenous players in the cocoa sector.
He cautioned that tampering with statutory reserves for commercial purposes could undermine the credibility of monetary policy and destabilize the financial sector.
Dr. Atuahene, in an interview with Speaking to Citi Business News, explained that the reserve is a monetary policy tool designed strictly for liquidity management, not for financing private enterprises.
These are cedis that have been mobilized and locked at the Central Bank. They are meant to ensure there is always liquidity for banks to operate. If you divert these funds to purchase cocoa, you reduce the liquidity available to banks at the Central Bank, he further stated.
Dr. Atuahene continued by saying the Bank of Ghana does not pay interest on these reserves, describing them as “unremunerated reserves.”
“Let’s be clear in our minds. When the Bank of Ghana requires banks to hold a certain percentage of deposits as reserves, it does not pay interest on those funds. So are we now suggesting that money, which banks are already not earning interest on, should be handed over for cocoa purchases? I strongly disagree” He added.
