Dr. Patrick Asuming, an economist, is urging the government to take additional steps to broaden the country’s export base and increase domestic production in order to stabilize the cedi in the long run.
This follows the government’s implementation of a new policy decision granting the Bank of Ghana (BoG) first right of refusal for all gold mined in the country, as part of efforts to position the central bank to build mineral reserves in order to stabilize the cedi.
The latest decision, which is already legal, is expected to strengthen the BoG’s gold purchase program in order to increase its foreign exchange reserves and combat the cedi’s depreciation against major trading currencies.
In an interview with Citi Business News, Dr. Patrick Asuming noted that the move will not fully solve the local currency’s problem.
The issue is that we’ve been mining gold, and the key problem we’ve been discussing that will solve the currency problem is how to diversify the export base and not try to bring up some institutional arrangements about how it is purchased and how much we store.
I think if we don’t broaden the base, we can’t say that we are solving the cedi’s long-term problem. I don’t see how that particular solution will hold. It might give some brief relief, but if export earnings haven’t changed, I don’t think that we have solved it fully. So we have to diversify the export base and also increase our domestic production, starting with agriculture and then agro-based processing to ensure that we do a fair amount of import substitution so that we will be able to save on some of the things that we can produce locally,” he said.
Government’s recent decision comes on the back of the fact that despite Ghana being one of the leading gold producers in the world, its reserves of gold at the central bank as at the end of 2021 was only 8.7 kilogrammes.
According to Vice President, Mahamudu Bawumia, this means the central bank will purchase the gold at world market prices and the mining companies will export the portion that is not purchased by the Bank of Ghana.
Ultimately, once government accumulates enough gold, future borrowing and the local currency can be backed by Gold.
