Renowned banking consultant Dr. Richmond Atuahene has strongly opposed suggestions that the Bank of Ghana (BoG) should divert part of the Cash Reserve Ratio (CRR) to support local cocoa buyers.
This comes after Dr. Randy Abbey, CEO of COCOBOD, proposed reallocating 2-3% of these reserves to assist Ghanaian cocoa purchasing firms. However, Dr. Atuahene argues that the CRR is a critical monetary policy tool meant for liquidity management, not funding private businesses.
Why This Proposal Is Risky
In an interview with Citi Business News, Dr. Atuahene explained:
- The CRR consists of cedi deposits locked at the Central Bank to ensure banks have sufficient liquidity.
- Diverting these funds for cocoa purchases would reduce liquidity, potentially destabilizing the banking sector.
- The BoG does not pay interest on these reserves, meaning banks already lose potential earnings on these funds.
“Are we suggesting that money which banks aren’t earning interest on should now be handed over for cocoa purchases? I strongly disagree,” he stated.
Potential Consequences
Dr. Atuahene warned that using statutory reserves for commercial purposes could:
- Undermine monetary policy credibility
- Destabilize the financial system
- Create unintended liquidity shortages
He urged policymakers to explore alternative financing mechanisms instead of risking financial sector stability.
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