Diverting Bank Reserves To COCOBOD Risks Monetary Stability - Atuahene

Banking Consultant, Dr. Richmond Atuahene has cautioned against proposals for the Bank of Ghana to allocate a portion of the Cash Reserve Ratio (CRR) to support local cocoa purchasing companies. His comments follow a suggestion by the CEO of COCOBOD, Dr. Randy Abbey that 2 to 3 percent of these reserves be redirected to sustain indigenous players in the cocoa sector. Speaking to the media, Dr. Atuahene underscored that the reserve is a monetary policy tool designed strictly for liquidity management not for financing private enterprises.

These are cedis that have been mobilized and locked at the Central Bank, he explained. They are meant to ensure there is always liquidity for banks to operate. If you divert these funds to purchase cocoa, you reduce the liquidity available to banks at the Central Bank. Dr. Atuahene also noted that the Bank of Ghana does not pay interest on these reserves, describing them as unremunerated reserves.

Let’s be clear, he stated. When the Bank of Ghana requires banks to hold a certain percentage of deposits as reserves, it does not pay interest on those funds. So are we now suggesting that money which banks are already not earning interest on should be handed over for cocoa purchases? I strongly disagree; he noted. Dr. Atuahene warned that tampering with statutory reserves for commercial purposes could undermine the credibility of monetary policy and destabilize the financial sector.