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Vice President Dr. Mahamudu Bawumia has unveiled plans to stabilize the value of the Cedi by tying it to gold, aiming to mitigate the currency’s depreciation and tackle ongoing forex issues.
This announcement follows the success of the Bank of Ghana’s domestic gold purchase program, which has led to the acquisition of 65.4 tons of gold valued at approximately $5 billion, significantly enhancing Ghana’s gold reserves.
At the inauguration of the Royal Ghana Gold Refinery in Accra, Dr. Bawumia proposed a new foreign exchange management framework set to be introduced next year. He emphasized that anchoring the Cedi to gold could provide a robust solution to the currency’s volatility.
“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,” he stated.
He further detailed the proposed framework, suggesting that significant gold demand be channeled through the Bank of Ghana’s gold purchase program. “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.”
Dr. Bawumia explained that this approach would leverage gold reserves to fulfill forex demands, maintaining exchange rate stability over the long term. “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.”
As of July 2024, the Cedi has depreciated by 19.6 percent against the dollar, according to the Bank of Ghana’s economic and financial data.
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