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| T O P I C R E V I E W |
| Momodou |
Posted - 01 Jun 2022 : 14:37:44
Why is Gambia Ports Authority (GPA) issuing ferry tickets in CFA then?
CBG will not allow dollarisation of the economy – Governor Saidy
The Standard: JUNE 1, 2022
By Tabora Bojang
The Governor of the Cental Bank of the Gambia, Buah Saidy has been defending the controversial policy decision to stop commercial banks from paying in dollars and other foreign currencies. The measure, announced last month, caused consternation to the business community and concern among the public. Many foreign current account holders complained it will affect them while others fear it would encourage hoarding of the dollar.
But Governor Saidy told journalists yesterday that the policy was adopted because the CBG wants to restrict dollarization of the Gambian economy.
Dollarization occurs when a country begins to recognise the U.S dollar as a medium of exchange alongside its domestic currency. It normally occurs when domestic currency loses its usefulness as a medium of exchange for market transactions.
According to Governor Saidy, since the liberalisation of the market in 1986 the foreign exchange market has been left on its own and this has been perpetuating unscrupulous activities by some economic agents and money transfer organisations in the country, posing threats to the national economy.
Responding to questions at the Monetary Policy Committee meeting of the Central Bank yesterday, Governor Saidy declared that it is incumbent on any national financial and economic regulatory institution to intervene when there is a market failure. “So, what we are telling banks is that those who have foreign currency deposits for whatever reasons, if they want to finance transactions abroad or travel abroad, the banks [in Gambia] can send those monies there and when they get there, they will get their money. But if you want to do a transaction in this country you cannot withdraw dollar and use dollar here. Whether you are an individual, a business or an international organisation, if you are doing business here in The Gambia and the money you are withdrawing is to finance a transaction here, the legal tender is the dalasi and we are telling banks to pay them in dalasi because even when you withdraw the dollar or the Pound Sterling from your foreign currency account, you are going to use it here to buy rice or oil, meaning you are going to convert that money somewhere outside the banking system and those kinds of activities are what create problems for an economy. Therefore, we want to restrict and control that pressure dollarization. We are not restricting the use of foreign currency accounts but you can only withdraw it in dalasi,” the governor said.
He added that the CBG made the decision to avoid the country from getting ‘blacklisted.’ “So, we are also trying to control and to know who is getting money out of this country. Some people opened foreign currency accounts to store the value of their money, and that is currency substitution. Because when inflation is high the dalasi is no more attractive and businesses and individuals will start substituting dalasi and dalasi denominated assets, reducing that in their portfolio and go for foreign currency and foreign currency denominated assets. Among these are foreign currency deposits. As a regulator of the financial system, we monitor what is happening in the market. These monies are being shipped on behalf of third parties, you have to know for purposes of preventing money laundering and other financing of terrorism activities,” he said.
He also warned against the use of other currencies like CFA to conduct business transactions in the country, saying it is illegal.
“To buy goods in CFA is illegal because the legal tender in this country is the dalasi. We are not part of the CFA zone so any business doing that is going against the law. We understand that some landlords are asking for rent in Pounds, Euro or the Dollar and that is not acceptable and anybody asking for rent in these currencies is embarking on an illegal activity and we are issuing a statement for them to desist. We also understand some schools are asking for fees in dollars and we are going to verify this because we cannot allow it. It is going to have negative implications on our economy and as a regulator, we will not sit and watch until disaster hits,” Governor Saidy concluded.
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| 1 L A T E S T R E P L I E S (Newest First) |
| Momodou |
Posted - 01 Jun 2022 : 14:41:19
Foroyaa Editorial: June 1, 2022
THE CENTRAL BANK NEEDS TO RETHINK
https://foroyaa.net/the-central-bank-needs-to-rethink/
“The Central Bank shall –
According to section 161 subsection (4) of the Constitution, the Central Bank of The Gambia has the following functions:
“The Central Bank shall –
(a) promote and maintain the stability of the currency of The Gambia;
(b) direct and regulate the financial, insurance, banking and currency system in the interest of the economic development of The Gambia;
(c) encourage and promote sustainable economic development and the efficient utilisation of the resources of The Gambia through the effective and efficient operation of a banking and credit system;
(d) exercise such other functions as may be conferred on the Central Bank by an Act of the National Assembly.”
It is the decision of the Bank to allow banks to advertise and lure customers to open and maintain foreign currency accounts. Since it is within the regulatory powers of the Central Bank to add conditionality on the grounds for withdrawing monies from such accounts by depositors, these conditions should have been laid out without any ambiguity to enable banks to include them during their advertisements to enable customers to know the basis for withdrawing any foreign currency deposit.
It is our finding that no condition was conveyed to persons when they were depositing their foreign currencies into foreign accounts opened by them in Gambian banks. After depositing their money without the condition to deprive them to withdraw it in foreign currency, depriving them the right to withdraw all their foreign currency if they do not agree to the condition is to deprive them of an acquired right.
This would be unjust by all standards. There is no doubt that the central bank has the regulatory powers but the regulation should be stated before granting the bank the powers to render service to the customers. Furthermore, the bank should do a thorough analysis and assess the role foreign currency accounts have played in the Gambian economy in terms of attracting remittances from Gambians abroad and accessing foreign currency from abroad.
There are two dangers to be addressed.
One danger which he mentioned is the dollarization of the economy and the other danger which he did not mention is the withering away or drying up of foreign currency. The bank has to choose which is the greater danger at this moment in time. Prudence is required to maintain a financial system and not reliance on speculative theorizing.
A system of justice must not operate on collective punishment. If there is wrong doing in the use of foreign currency deposit in the bank, the wrong doers should be identified and subjected to due process. |
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