Dr. John Kwakye, the Director of Research at the Institute of Economic Affairs (IEA), has called on the government to explore avenues to attain full ownership of Ghana’s natural resources in order to bolster the value of the Cedi.
Dr. Kwakye highlighted the potential of utilizing resources such as gold to support the Ghanaian Cedi, envisioning it as a strategy to elevate Ghana’s currency to a position of strength in global trade. He emphasized this approach amidst the government’s efforts to counter the devaluation of the Cedi.
Various trade unions and associations have expressed concerns over the depreciation of the Cedi, citing its detrimental impact on their business operations.
Current market trends indicate a notable increase in the value of the dollar against the Cedi, with reports from Bloomberg attributing the Cedi’s depreciation to factors such as declining cocoa earnings due to adverse weather conditions and disease.
During an appearance on Acrra-based Citi FM, Dr. Kwakye of the IEA, underscored the importance of minimizing reliance on external support to stabilize the Cedi, noting its inherent challenges and limitations.
“The underlying fundamental structure of the economy hasn’t changed and I have always said that relying on external loans to support your currency is not sustainable because you will eventually have to pay back and when you begin paying back, there will be outflows and so it looks like we are now just waiting for the IMF’s $360 million to be stronger for a while and return to our struggling state.
“The Cedi is vulnerable and we can only stop the fall temporarily and the depreciation will resume again.”
“Your reserves support your currency and so our national reserves support the Cedi and so wherever your reserves are coming from, for example, in gold, what we need to understand is that we need to own our own reserves of gold and we need to take ownership and increase the reserves.
“If we take ownership of our resources, we can use them to back our currency to strengthen it,” the economist added.
He cautioned that temporary measures, such as relying on external loans, are not sustainable in the long term and can exacerbate economic vulnerabilities.
Dr. Kwakye emphasized the significance of national reserves in supporting the currency, suggesting that Ghana should focus on increasing reserves by taking ownership of its resources, particularly gold.
The Director of Research at the IEA, asserted that leveraging natural resources to back the Cedi could provide a sustainable solution to strengthen the currency and mitigate future depreciation.
