Transforming Ghana’s Financial Landscape: A Look into the Proposed Foreign Exchange Law

In a significant move towards revitalizing the banking sector in Ghana, Dr. Johnson Pandit Asiama, Governor of the Bank of Ghana, has unveiled an ambitious plan to introduce a new foreign exchange law. This initiative forms a crucial component of a larger, strategic six-point intervention aimed at evolving the nation’s financial environment. As Dr. Asiama remarked, “We will implement strategic interventions, including the enactment of a new foreign exchange law to replace the Foreign Exchange Act 2006 (Act 723).” This announcement took place at the prestigious Jubilee House on a notable Tuesday in February, capturing the attention of financial stakeholders across the country.

Understanding the Foreign Exchange Act 2006 (Act 723)

The current Foreign Exchange Act, enacted in 2006, serves as the backbone for governing foreign exchange transactions within Ghana. This piece of legislation outlines the protocols for buying, selling, and transferring foreign currencies, as well as facilitating international payments. In the ever-fluctuating world of global finance, how crucial is it for a country to continually evolve its legislative frameworks to ensure currency stability and effective management?

Dr. Asiama acknowledges the existing structure’s contributions but emphasizes that the forthcoming changes are expected to usher in an era of enhanced stability and efficiency in foreign exchange trading. With a new legal framework on the horizon, the banking sector’s ability to handle foreign transactions is projected to improve substantially.

Key Provisions of the Foreign Exchange Act 2006 (Act 723)

Since its inception in December 2006, the Foreign Exchange Act has undergone various interpretations through notices such as BG/GOV/SEC/2007/3 and BG/GOV/SEC/2007/4, provided by the Bank of Ghana in March 2007. But let’s pause for a moment—have these updates adequately equipped the sector to thrive in today’s global economy?

The following are some key highlights of the current legislation:

1. The 10% limit on non-resident foreign investors’ holdings in securities listed on the Ghana Stock Exchange has been removed. Additionally, the 74% limit on total non-resident foreign investor holdings in any listed security has been lifted.
2. Local and foreign investors need prior approval from the Bank of Ghana to acquire more than 10% of any listed banking stock under the Banking Act 2004 (Act 673).
3. Non-resident foreigners are permitted to invest in money market instruments with maturities of three years or more, like the Government of Ghana’s five-year bond which matured in December 2011.
4. Non-resident companies aiming to issue securities on Ghana’s stock market must secure approvals from both the Securities and Exchange Commission and the Bank of Ghana. Any proceeds from such sales are to be reported to the Bank of Ghana.
5. Individuals eligible to trade in listed securities on the Ghana Stock Exchange include:

• Externally resident Ghanaians
• Non-Ghanaian residents in Ghana

1. External residents investing in listed securities qualify for unrestricted foreign exchange remittances on:

• The original capital or principal amount
• Capital gains
• Dividends or interest payments
• Related earnings and refunds

Definitions within the Act also play a pivotal role:

• “Securities listed on the Ghana Stock Exchange” refer to securities officially approved for trading on the exchange.
• “Dealings in listed securities” include both the purchase and sale of securities in the secondary market and the purchase of securities approved by the exchange in the primary market.
• The Managing Director of the Ghana Stock Exchange holds the power to certify whether any security is listed or if a transaction qualifies as dealing in securities.

Additionally, the law navigates the intricacies around the Exchange Control Act 1961 (Act 71) by waiving certain obligations concerning listed securities. It mandates that securities registration officers keep the Bank of Ghana informed about transfers involving both externally resident Ghanaians and non-Ghanaian investors through monthly reporting.

With Dr. Asiama’s reforms on the horizon, there’s an optimistic anticipation of modernizing these regulations, enhancing the appeal of Ghana’s financial markets to both local and international investors. Will these changes serve as a catalyst for Ghana’s emergence as a financial powerhouse in the region?

Edited By Ali Musa Axadle Times International–Monitoring.