Individuals and businesses in Ghana are gradually making withdrawals from banks due to speculations that the Bank of Ghana is considering abolishing holding of foreign accounts in a move to halt the depreciation of the Cedi.

Despite assurances from the Central Bank and the Finance Ministry that no foreign accounts shall be closed, checks by Economy Times revealed that since the news broke out last Thursday, many holders of the aforementioned accounts became panic and rushed to the banks to withdraw their foreign currencies such as US Dollar, British Pounds Sterling and the Euro.

“Customers especially individuals and operators of small-scale businesses are worried their money isn't safe here anymore,” a Bank Teller at GT Bank at Ridge in Accra who pleaded anonymity told Economy Times during a visit to the banking halls in Accra yesterday. Apart from the aforementioned bank, the paper also visited Ecobank, uniBank Ghana Limited, Ghana Commercial Bank, UT Bank, Stanchart and Barclays Bank.

“Most of them withdrew their monies on Friday leaving only $100 dollars in their accounts. When we tried to allay their fears, they said we cannot trust the government. Our politicians are always deceiving us. This has been their comments,” a banker at Barclays’ Ring Road Central Branch told this paper.

Abolishing holding of foreign accounts when implemented would mean that individuals and companies would not hold bank accounts either in US Dollars, Pounds or Euros in Ghana. Existing foreign accounts would be converted into cedi accounts if this is implemented.

Further checks by this paper revealed that the situation in Accra was not different from what is happening in other parts of the country such as Kumasi, and the oil city Takoradi, where a lot of businesses are situated. Ecobank on the other hand had not witness such withdrawals as at the time of filing this story.

“Deposits are the lifeblood of any bank and no banking system, no matter how strong, can survive massive and prolonged withdrawals of deposits,” Kris Niswander, associate director of European financial institutions for SNL Financial has said in an interview with CNN when commenting on a similar situation which hits Greece banks recently.

If you have significant deposit withdrawals, that are difficult for any institution to overcome no matter the macroeconomic factors, Kris added.

Although some measures have been implemented by the Bank of Ghana, including shoring up the cedi with millions of dollars, the cedi keeps depreciating. The phenomenon has been attributed to the mad rush for the US currency; the Dollar and the fear that government will overspend this election year. The situation according to experts can lead to onset of capital flight, where foreign investors clear off their investment to their home countries. Recently, a Senior partner of Price water House Coopers in Ghana, Felix Addo, cautioned that the economic gains of the country may be eroded if quick solutions are not sought to mitigate the depreciation of the cedi. In an interview with etv Ghana, Mr Addo advised businesses to patiently wait and allow the policies put in place by the Bank of Ghana to work.

When the new broke out the former Finance Minister under the erstwhile NPP administration, Osafo Marfo had raised diverse views on the Bank’s decision, describing it as an enemy to trade.

Mr Marfo in his views emphasised that, as the country is yearning to be the hub of banking and trading in the West African region, such policy would be dangerous to the economy. He mentioned that, the cause of the depreciation of the cedi against the major foreign currencies could be as a result of excessive cheap monies such as monies earned from corrupt practices.

“We can also blame it on the Chinese galamsey operators who have flooded the country in recent months because they always change their money in foreign currencies and could put pressure on our cedi,” he stated.

Meanwhile, the Head of Gold Coast Securities, Samuel Ampah, said, “We have had an issue in this country where everything is dollarised and that is not helping the economy.”

He added: “When people hold dollars in their accounts it puts them in a situation where they always want to do transactions in foreign currencies or dollars. But I believe the point the Bank of Ghana is trying to make is that if we live in a country that our local currency is the Cedi, all transactions should be in Cedi”.