The Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, has announced plans to introduce a new foreign exchange law as part of efforts to enhance the country’s banking sector.
- Governor of the Bank of Ghana plans to introduce a new foreign exchange law
- The current Foreign Exchange Act 2006 regulates foreign exchange transactions in Ghana
- The new law aims to enhance the banking sector and transform Ghana’s financial landscape
According to Dr Asiama, this initiative is one of six key interventions he aims to implement during his tenure, all designed to transform Ghana’s financial landscape.
“We will implement strategic interventions, including the enactment of a new foreign exchange law to replace the Foreign Exchange Act 2006 (Act 723),” he stated at the Jubilee House on Tuesday, 25 February, after being sworn into office by President John Mahama alongside the First Deputy Governor.
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Understanding the Foreign Exchange Act 2006 (Act 723)
The Foreign Exchange Act 2006 (Act 723) currently regulates foreign exchange transactions in Ghana.
It establishes the framework for buying, selling, and transferring foreign currencies within the country, as well as facilitating international payments.
Additionally, it provides guidelines for managing foreign exchange movements and ensuring compliance with currency exchange and remittance laws.
Dr Asiama emphasized that once the new law is enacted, the banking sector will witness substantial improvements in foreign exchange trading, fostering stability and efficiency.
Key Provisions of the Foreign Exchange Act 2006 (Act 723)
Since its enactment on 29 December 2006, the Bank of Ghana has issued several notices to provide further guidance on its implementation.
These include BG/GOV/SEC/2007/3 and BG/GOV/SEC/2007/4, both issued on 15 March 2007. The main highlights of the current law include:
- 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.
- Local and foreign investors must seek prior approval from the Bank of Ghana before acquiring more than 10% of any listed banking stock under the Banking Act 2004 (Act 673).
- Non-resident foreigners can now invest in money market instruments with a maturity period of three years or more. For instance, the Government of Ghana’s five-year bond (due December 2011) is available to non-resident investors.
- Non-resident companies seeking to issue securities on Ghana’s stock market must obtain approval from both the Securities and Exchange Commission and the Bank of Ghana. Any proceeds from such sales must be reported to the Bank of Ghana.
- The following individuals can trade in listed securities on the Ghana Stock Exchange:
- Externally resident Ghanaians
- Non-Ghanaian residents in Ghana
- External residents investing in listed securities qualify for full and unrestricted foreign exchange remittances on:
- The original capital or principal amount
- Capital gains
- Dividends or interest payments
- Related earnings and refunds
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- Definitions under the Act:
- “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 has the authority to certify whether any security is listed or if a transaction qualifies as dealing in securities.
The law also waives certain obligations under the Exchange Control Act 1961 (Act 71) concerning listed securities and requires securities registration officers (company registrars) to submit monthly reports on transfers involving externally resident Ghanaians and non-Ghanaian investors.
Dr Asiama’s proposed reforms seek to modernise and improve upon these regulations to make Ghana’s financial markets more attractive to both local and foreign investors.
