Bawumia proposes gold-backed plan to stabilise Cedi

Vice- President Dr. Mahamudu Bawumia has announced plans to anchor the value of the Cedi to gold, aiming to shield the country’s currency from depreciation and mitigate ongoing foreign exchange challenges.

The proposal builds on the success of the domestic gold purchase programme, which has seen the Bank of Ghana amass 65.4 tonnes of gold valued at USD5 billion, significantly enhancing the nation’s gold reserves.

Speaking at the inauguration of the Royal Ghana Gold Refinery in Accra on Thursday, 8 August 2024, Dr. Bawumia outlined his strategy to ensure the long-term stability of the Cedi through a new foreign exchange management system.

“I would like to propose a new foreign exchange regime management architecture for Ghana next year, in which the value of the Cedi will be anchored to gold

“I believe that the best anchor for the Cedi is gold. I want us to anchor the Cedi to gold,” Dr. Bawumia stated.

He further explained that under this proposed system, the Bank of Ghana’s gold reserves would play a crucial role in managing foreign exchange demand.

“If you have GHS3 billion and you are looking to buy forex, the Bank of Ghana can take the GHS3 billion, buy gold, and give you your forex. Demand equals supply, and the exchange rate doesn’t move,” he explained.

Dr. Bawumia stressed that this approach would not only stabilise the exchange rate but also free up additional forex reserves for other critical needs.

“You will maintain long-term exchange rate stability, which will be anchored on gold, and then we will move forward,” he added.