Bawumia Proposes Gold-Backed Cedi to Stabilize Local Currency
Ghana’s Vice President, Mahamudu Bawumia, has announced an ambitious plan to anchor the value of the cedi to gold if he secures the presidency in the upcoming December elections.
This proposal marks a significant shift in the nation’s monetary policy and could position Ghana as the first African country, after Zimbabwe, to back its currency with gold in an effort to stabilize the exchange rate.
Speaking in Accra, Dr Bawumia outlined his vision for a new foreign exchange regime management act, aimed at mitigating the cedi’s persistent depreciation against the US dollar.
The cedi has lost 23.3% of its value against the greenback this year, making it one of the world’s worst-performing currencies, according to Bloomberg data.
The proposed gold-backed currency strategy echoes Zimbabwe’s recent overhaul of its currency regime, where the local unit was replaced with the gold-backed ZiG (Zimbabwe Gold) following severe depreciation.
With Ghana being Africa’s top gold producer, Dr Bawumia’s plan taps into the country’s robust gold reserves to provide a more stable anchor for the cedi.
The weakening of the cedi has been a key driver of inflation, which stood at 22.8% in June. This has exacerbated economic pressures on households and businesses, with the central bank struggling to bring inflation within its target range of 6% to 10%.
Dr Bawumia, who is the presidential candidate for the ruling New Patriotic Party, also proposed a reduction in withholding tax from 1.5% to 1% to alleviate the economic burden on companies.
His economic agenda will be a central theme in his contest against the main opposition leader, former president John Dramani Mahama, in the upcoming elections, as President Nana Akufo-Addo steps down after his second and final term.
Dr Bawumia’s proposal, if realized, would have far-reaching implications for Ghana’s economy and its financial markets, presenting both opportunities and challenges in managing the nation’s gold reserves while seeking to stabilize its currency.
