Bawumia proposes gold-backed cedi to stabilize currency
Fri Aug 09 2024
Speaking at the inauguration of the Royal Ghana Gold Refinery in Accra on Thursday in Accra, Dr. Bawumia highlighted that the proposed foreign exchange policy would aim to ensure the long-term stability of the Cedi.
“I would like to propose a new foreign exchange regime management architecture for Ghana next year in which the value of the cedi with everything we have put in will be anchored to gold. I want us to move our foreign exchange management because we need an anchor and I believe that the best anchor for the Cedi is gold. I want us to anchor the Cedi to gold," Dr. Bawumia said.
He explained that under the proposed framework, all significant demand for foreign exchange would be channeled through the Bank of Ghana’s gold purchase programme. This would allow the central bank to use its gold reserves to meet the demand for foreign currency, thereby stabilizing the exchange rate.
Dr. Bawumia emphasized that anchoring the Cedi to gold would not only stabilize the exchange rate but also free up additional forex reserves for other national needs.
“I am proposing a framework which we will discuss with the central bank, of course, and we will see where. But the framework that I am proposing is very simple. Having looked at all that we have done, all significant demand for gold should be channelled through the Bank of Ghana’s gold purchase programme," he stated.
“If you have GHȼ3 billion and you are looking to buy forex, the Bank of Ghana can take the GHȼ3 billion and buy gold and give you your forex. Demand equals supply, exchange rate doesn’t move.
“It is just a simple use of our gold reserves to meet the demands of forex. Once you can anchor the Cedi with gold so that you are able to meet demand then there are so many extra forex reserves to do other things for the country. But then you will maintain long-term exchange rate stability, which will be anchored on gold and then we will move forward,” the Vice President said.
If implemented, Ghana would become the first country in the region, following Zimbabwe, to back its local currency with gold.
This move comes as the Cedi has depreciated by 19.6 percent against the dollar as of July 2024, according to the Bank of Ghana’s economic and financial data.
Source: https://www.graphic.com.gh