IMF directs BoG to scrap supply of cheap dollars to BDCs

 IMF directs BoG to gradually phase out the special forex auctions that ensures that Bulk Oil Distributors (BDCs) are supplied with dollars at lower rates.

IMF directs BoG

This is to ensure that BoG’s forex liquidity is provided at prevailing market exchange rates.

The IMF stated this position in the document spelling out the details of the three-year $3 billion bailout programme with Ghana.

The Fund noted that at times, the BoG has provided forex support at rates other than those prevailing in the market, leading to the emergence of multiple exchange rates.

“Going forward the BoG will ensure its FX liquidity is provided at prevailing market exchange rates and implement measures to further support unifying the exchange rates,” it added.

The BDCs require about $300 million a month import finished petroleum products for public consumption.

The BDCs struggle to get access to enough foreign exchange at affordable rates in open market.

BDCs buying $480 million from the open market increase demand and puts pressure on the local currency.

In an attempt to resolve the issue of inadequate US dollars for BDCs, whose work influences the final price of fuel at the pumps, BoG introduced a special foreign exchange forward auction programme for the BDCs.

The special forex auctions had a positive impact on the prices of petroleum products at the pumps.

The forex auction is held bi-weekly and conducted no later than three working days before the 1st and 16th of each month.

Without an active forward forex market for the petroleum industry,  speculators tended to largely control the market.

Buying dollars from the commercial banks, forex bureaus and sometimes from the black market at a higher forex rate mean higher prices at the pumps for Ghanaians.

In an open market where demand and supply greatly impact the depreciation of the cedi, BDCs buying millions of dollars from the open market can only weaken the depreciating cedi further.

The Chamber of Bulk Oil Distributors (CBOD) has been operational since 2012 but was formally incorporated in January 2014.

CBOD serves as the advocacy, lobby and representative body of Bulk Import, Distribution and Export Companies (BIDECs), Storage Depots and other affiliated Petroleum Service Providers (PSPs) in the downstream petroleum industry.

It also function as an industry research and strategy unit committed to enhancing the industry’s commercial viability and sustainability.

The CBOD operates as an active and responsible industry player, partnering allied agencies for national development while coordinating and facilitating healthy cooperation and competition amongst our members.

The Chamber currently has a membership of 46 made up of 36 BIDECs, 7 Storage Depots and 3 other PSPs.