Experts Question Ghana VP's Gold-Backed Currency Pledge
A Ghanaian banking consultant, Richmond Atuahene, has expressed concerns about Vice President Mahamudu Bawumia’s pledge to back the cedi with gold. Atuahene believes Ghana needs a stable economic environment before implementing this policy. John Gatsi, a dean at the University of Cape Coast School of Business, warns that backing the cedi with gold alone will not solve its instability issues.
Ghana Must Diversify Economy First
A Ghanaian banking consultant has expressed reservations about Vice President Mahamudu Bawumia’s pledge to back the local currency with gold. According to a report, the consultant, Richmond Atuahene, believes that Ghana needs a stable economic environment before launching a gold-backed currency.
For Ghana to achieve stability, the consultant said the government of Bawumia, a presidential candidate in the upcoming election, must address the local currency’s depreciation and high inflation rates. Atuahene added that the government must help diversify the economy and reduce its reliance on cocoa and gold exports.
“The gold standard’s success in Ghana hinges on the government’s commitment to a stable and viable economy. Without addressing the weaknesses in macroeconomic stability, adopting a gold standard could limit monetary policy flexibility and exacerbate economic instability,” Atuahene explained.
Speaking at the recent ceremony marking the launch of Royal Ghana Gold Limited, the country’s first refinery, Bawumia promised to link the cedi’s value with gold if he wins the December elections. Backing the cedi with gold will help stabilize the currency, which has depreciated by 25% since the start of 2024.
However, in his recent essay responding to Bawumia’s election promise, Atuahene argued that the Ghanaian government will have to increase the proportion of gold export proceeds surrendered by miners from 13.5% to 25% if it wants a gold-backed cedi to become a reality.
Meanwhile, the report quotes John Gatsi, a dean at the University of Cape Coast School of Business, who similarly warned that backing the cedi with gold alone will not solve its instability issues. Gatsi added that this plan only works if Ghana significantly boosts national gold reserves.
Gatsi added that the Bank of Ghana must also play its part by dealing with the demand for foreign exchange. Only by taking these steps will the Ghanaian government achieve its goal of returning to the gold standard.
Source: https://news.bitcoin.com/