Cedi Depreciation: Bawumia prescribes gold-backed cedi for stability

Vice President, Dr. Mahamudu Bawumia, has unveiled plans to anchor the value of the Cedi to gold in an effort to stabilise the local currency and address ongoing foreign exchange challenges.

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 channelled through the Bank of Ghana’s gold purchase rogram. This would allow the central bank to use its gold reserves to meet the demand for foreign currency, thereby stabilising the exchange rate.

Dr. Bawumia emphasised that anchoring the Cedi to gold would not only stabilise 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 program,” 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.

Source: Graphic Online