Foreign exchange bureaus in the economy of Ghana

From 1983, Ghana embarked on an economic recovery programme (ERP), an important feature which was trade and foreign exchange liberalization. This called for a legalization of the black market into foreign exchange (forex) bureaus. This paper looks at the structure of this market, including the major players, the level of activity and availability of currency on the market. The paper also looks at the efficiency of the market. The intention here is to ascertain whether information is widely and cheaply available to market participants. Lastly, the paper looks at the tax generation capacity of the bureau after the legalization of the black market. The main findings are that the market pivots around traders, and that small-scale users of foreign currency benefit enormously from this market. Since a higher percentage of the traders operate within the sub-region, intra-West African trade is substantially enhanced. The paper also found that the market is generally inefficient, evidenced by the number of arbitrage opportunities that exist. However, the benefits to Ghana from the introduction of the forex bureaus include an increased availability of foreign currency, tax revenue and employment. Forex bureau taxes bring the government more than 1% of company taxes, plus a license renewal fee of US$1 ,000 per bureau per year. The bureaus have also removed the inconveniences which small-scale foreign currency purchasers experienced in the previous exchange control regime. The most important development has been that the forex bureaus have obviously increased the overall level of economic activity in the country.