The International Monetary Fund (IMF) and the Bank of Ghana (BoG) are finalising a new rule-based and transparent foreign exchange (FX) operations framework to strengthen the country’s external buffers.

This will not only curb exchange rate volatility but also improve the flow of foreign currency within the economy.

It follows concerns by some market watchers that the Central Bank has been overly intervening in the FX market; a trend they say distorts price stability and weakens confidence in Ghana’s flexible exchange rate regime.

The new framework, according to the IMF, will make the operations of BoG more predictable and market-driven, while enhancing transparency in the allocation of foreign exchange.

“We have worked closely with the Central Bank on a revamped foreign exchange operations framework, and this was an important key pillar for the fifth review. Basically, the new framework is rule-based, transparent and objective-oriented,” IMF Resident Representative to Ghana, Dr. Adrian Alter disclosed in a yet to be aired interview on Channel One TV’s Point of View with Bernard Avle.

The overall effect will be to entrench macroeconomic stability and restore confidence in the country’s currency management system.

He explained that the framework is built around three main objectives which include rebuilding external reserves, smoothing excessive exchange rate volatility and improving the management of FX flows through the Bank of Ghana, including those linked to the Gold Board.

“First, to continue to rebuild FX buffers; second, to smoothen volatility of the exchange rate; and third, to intermediate FX flows that go to the BoG, including through Gold Board,” he elaborated.

Dr. Alter said the IMF and BoG are finalising operational details and will seek the approval of the BoG Board before implementation.

He further stressed that the new framework will preserve Ghana’s flexible exchange rate regime but make interventions “more transparent and market neutral,” allowing the interbank market to function efficiently with minimal distortions.