Bawumia proposes anchoring Cedi to Gold for long-term stability

Vice President Dr Mahamudu Bawumia has hinted at plans to anchor the value of the Cedi to gold in an effort to cushion the local currency against depreciation and address persistent forex challenges.

This follows the success of the domestic gold purchase programme, under which the Bank of Ghana has acquired 65.4 tons of gold valued at US$5 billion, significantly boosting Ghana’s gold reserves.

Speaking at the inauguration of the Royal Ghana Gold Refinery in Accra on Thursday, Dr Bawumia stated that the new forex exchange policy would 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.

“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.

“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.

According to the Bank of Ghana’s summary of economic and financial data, the Cedi has depreciated by 19.6 percent against the dollar as of July 2024.

Credit: Citi Business News