The Real Challenge: Ghana’s Struggle to Access Physical US Dollars

HARD, PHYSICAL CURRENCY is the problem…..

The Bank of Ghana’s access to physical dollars is constrained because:
· No Direct Channel: It lacks a direct swap line with the Fed.
· Market Dependency:

It is entirely dependent on the foreign exchange market to acquire dollars (either electronically or physically).
· High Cost:
The process of converting electronic reserves into physical cash and then shipping and securing it is very expensive (armored transport, insurance, security). This is a significant cost that the BoG must bear, which is why they strongly prefer that domestic transactions happen electronically.

· The “Two Sources”:
Physical dollars in Ghana can only come from (1) the BoG buying them on the market and importing them or (2) private citizens/businesses physically bringing them into the country and depositing them into the banking system.

The Crucial Distinction:

Electronic USD vs. Physical USD
The key for the BoG is to make this distinction clear to the public:

· “You have access to your electronic dollar balance.” You can use it to make electronic payments, international transfers, and letters of credit for imports. The bank wants you to use it this way.

· “You do not have an unlimited right to convert it into physical dollar notes.” Because the physical notes are a scarce, costly, and controlled resource that the BoG must manage for the stability of the entire economy.

It actually costs BoG to acquire physical hard currency that it does not issue.
The limitation on hard currency withdrawals is a crisis management tool. It’s a symptom of the underlying problem: insufficient forex reserves and pressure on the local currency. While it is often unpopular with the public and businesses, from the central bank’s perspective, it is a rational and necessary step to prevent a complete depletion of reserves and a deeper economic crisis.