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Dr. John Kwakye, Director of Research at the Institute of Economic Affairs, has now joined American Professor Steve Hanke in predicting that a Currency Board is the only way to save the Ghana cedis and give it lasting stability.\u00a0<\/p>\n
Since President Akufo-Addo seems bent on retaining the services of Finance Minister, Ken Ofori-Atta who has failed to announce any plan for stemming the cedi\u2019s slide, it is worth considering the alternative of tying the cedi to a stronger foreign currency, as it may end up being Ghana\u2019s last and only resort.<\/p>\n
According to Investopedia, a Currency Board is an extreme form of a pegged exchange rate, in which the Board replaces a country\u2019s Central Bank in managing the money supply.\u00a0 France\u2019s former colonies in West Africa together participate in UEMOA, the West African Economic and Monetary Union.<\/p>\n
Its central bank, BCEAO, handles monetary policy for the member states.\u00a0 It keeps their common currency, the Franc Communaut\u00e9 Financi\u00e8re Africaine or F CFA, exchanging at a fixed rate against the euro.<\/p>\n
Aspects of the F CFA arrangement are retrograde, but for instance, French President Macron has already agreed that the 14 subscribing African countries will no longer be required to deposit half of their currency reserves in the French Treasury.<\/p>\n
Dr. Kwakye cautioned that currency reform must happen in stages<\/p>\n
\u201cBecause most of the other countries in Ghana\u2019s neighborhood, comprises 14% percent of Africa\u2019s Gross Domestic Product, accepting the F CFA peg to the euro, the Ghanaian government may want to think about following suit, as a transitional measure towards a new and united African sovereign currency eventually divorced from French supervision.<\/p>\n
Ghana\u2019s friend the United States of America may prefer a peg to the dollar, instead of the euro, but there is a reason to hesitate.\u00a0 In national elections coming up in 10 days\u2019 time, the opposition Republican Party is projected to gain control of one or both chambers of the federal legislature.\u00a0 They have announced plans to hold hostage America\u2019s debt ceiling, which Congress must extend periodically, to score political points.<\/p>\n
The last time Republicans performed this stunt, in 2011, American sovereign debt suffered its first-ever downgrade.\u00a0 The recent experience of the British pound shows how quickly a stable currency can fall when foolish political schemes interfere.\u00a0 If the cedi was tied to the dollar, it would take the same plunge, relative to the world\u2019s other currencies.<\/p>\n
Whether Ghana\u2019s Central Bank, the BCEAO, or an independent Currency Board pegged the cedi to the euro, it would mark not only the end of the cedi;s plummet, but also a significant step towards African unity.\u00a0 While West African states are rightfully concerned about joining currencies with Nigeria due to its overall bigger size, 18% of African GDP, and the history of its own instability, a decision by African countries in East or Southern Africa to join around the same time would act as a counter-balance.<\/p>\n
A currency union of low-income countries without a credible nominal anchor such as France\u2019s guarantee is unprecedented.\u00a0 A sovereign monetary union would require a political superstructure to replace the French guarantee, in case of a crisis.\u00a0 The European Union was able to save the euro during the Greek financial meltdown, barely.<\/p>\n
Big countries like China and India managed to develop on their own.\u00a0 Globalized trade, shipping across oceans and borders, profits from sending part of its cost into the atmosphere, the fossil fuel emissions that cause global warming.\u00a0 Export of manufactured goods drove China\u2019s development, but that model is no longer sustainable.<\/p>\n
India, which like China has undergone tremendous growth in recent decades, may offer a more apt model of economic development for United Africa.\u00a0 Mahatma Gandhi, famous for spinning the cotton wheel, preached self-reliance.\u00a0 India today is among the countries the furthest along in shifting green-ward and away from fossil fuels. Undeveloped and United Africa, particularly inside the tropics, will have an even easier time of it, since we are already starting nearly from scratch and there is no need to heat buildings during a cold winter.\u00a0 Securing for Ghana a sounder currency may be a first step<\/p>\n
DISCLAIMER: <\/strong>The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Dr. John Kwakye, Director of Research at the Institute of Economic Affairs, has now joined American Professor Steve Hanke in predicting that a Currency Board is the only way to save the Ghana cedis and give it lasting stability.\u00a0 Since President Akufo-Addo seems bent on retaining the services of Finance Minister, Ken Ofori-Atta who has […]<\/p>\n","protected":false},"author":1,"featured_media":1169824,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[72],"tags":[672,4219,21729,23858],"class_list":{"0":"post-1235525","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-cedi","9":"tag-dollar","10":"tag-myjoyonline-com","11":"tag-peg"},"_links":{"self":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/1235525","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/comments?post=1235525"}],"version-history":[{"count":0,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/posts\/1235525\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/media?parent=1235525"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/categories?post=1235525"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2022\/wp-json\/wp\/v2\/tags?post=1235525"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}