\n
Renowned Economist and Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwabena Kwakye, has explained that his dollarization proposal for dealing with the falling cedi was born out of desperation and can only be a short-term measure.<\/p>\n
The former\u00a0Bank of Ghana\u00a0Monetary Policy Committee member, in a social media post on X, had advocated for official dollarization given the pace at which the cedi is currently depreciating.<\/p>\n
But clarifying his statement, Dr. Kwakye emphasized that the move cannot be a long-term one.<\/p>\n
\u201cTo be honest with you, I think I made that suggestion out of some kind of desperation. People are asking for short-term measures. What do we do now? It is like firefighting. So, I wasn\u2019t offering that as the long-term kind of solution,\u201d he told Starr News\u2019 Edem Kojo.<\/p>\n
\u201cI was making the point that given the way the exchange rate is going, it\u2019s as if our authorities don\u2019t have a solution to the problem. So, the action I thought is maybe let\u2019s just adopt the dollar,\u201d he further clarified.<\/p>\n
Explaining how the dollarization would be rolled out, Dr. Kwakye proposed three options the government can explore.<\/p>\n
\u201cThere are about three ways of doing it. The first is what we call unilateral dollarization. That way, we don\u2019t even have to agree with the US. We will sit down here and say, we want to adopt the dollar as our currency. So, we look at how much the Reserve\u00a0Bank of Ghana\u00a0has, some of it is in gold, some of it is in foreign exchange reserves, and so on. And therefore, we can let them keep part of it, and the rest we convert it to dollars and say, Ghanaians, bring your cedis in exchange for dollars,\u201d he explained.<\/p>\n
He, however, reiterated that the move will only be a stop-gap measure while the underlying structural issues are addressed.<\/p>\n
\u201cThis will be for a couple of years, maybe two years or so. It will not be a substitute for the underlying structural weaknesses; we should continue to take measures to address those problems. But for the meantime, it\u2019s like we are stabilizing the system,\u201d he emphasized.<\/p>\n
The second approach, according to him, is a total adoption of the dollar.<\/p>\n
\u201cThe second is to approach the US and say that we want to adopt your currency. In the same way, they will say, OK, what reserves do you have in exchange for it? So, you also exchange your reserve and then you take their currency,\u201d he said.<\/p>\n
A more sustainable approach, according to Dr. Kwakye, is the maintenance of the cedi as the official currency, while fully backing the cedi with foreign exchange through the introduction of a currency board.<\/p>\n
\u201cThe third approach is to maintain our currency. But we ask the central bank to make sure that they have enough foreign exchange to back it. So, we call something a currency board. A currency board means that you have your own currency but every single cedi is backed fully by foreign exchange. So, in that case, the cedi will not depreciate,\u201d he explained.<\/p>\n
Dr. Kwakye adds that strict terms are, however, needed for its successful implementation.<\/p>\n
\u201cIt comes with very rigid, strict terms in the sense that the currency board doesn\u2019t lend to the government. Because lending to the government also generates too much liquidity and then fuels depreciation. So, it brings some kind of restrictions,\u201d he concluded.<\/p>\n
The cedi, since the beginning of the year, has depreciated by about 14% against the dollar, as the dollar is being sold at some retail outlets at GH\u00a215.<\/p>\n
Source:\u00a0<\/strong>starrfm.com.gh<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"
Renowned Economist and Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwabena Kwakye, has explained that his dollarization proposal for dealing with the falling cedi was born out of desperation and can only be a short-term measure. The former\u00a0Bank of Ghana\u00a0Monetary Policy Committee member, in a social media post on X, […]<\/p>\n","protected":false},"author":1,"featured_media":168228,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-183428","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"\n
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