The Institute of Economic Affairs (IEA) has voiced reservations over the Bank of Ghana’s (BoG) new Ghana Gold Coin (GGC) initiative, arguing that it fails to tackle Ghana’s fundamental economic challenges.

The central bank launched the GGC on 27 September as part of a programme to increase savings and boost liquidity within Ghana’s financial markets, with the coin touted as an alternative to the U.S. dollar. However, the IEA contends that this approach merely highlights the underlying economic instability driving Ghanaians towards foreign currencies.

In its latest report, the IEA suggests that focusing on the GGC as a way to curb dollar demand overlooks deeper issues impacting the cedi’s stability. The IEA argues that the coin’s liquidity impact is questionable, pointing out that the central bank’s process of minting GGCs does not actually reduce the money supply.

“The Bank of Ghana buys gold using cedis, mints it into coins, and sells them back to Ghanaians, effectively circulating the same cedis back into the economy,” the report notes. “This doesn’t reduce liquidity, which contradicts the BoG’s aim of using the GGC to manage liquidity.”

The IEA has recommended that the BoG address the factors leading to the cedi’s depreciation, advocating for greater fiscal and monetary discipline, measures to control inflation, and structural reforms to rebalance the demand and supply of foreign exchange.

Without such actions, the IEA warns that Ghana’s reliance on foreign currency is unlikely to diminish, calling into question the long-term impact of the gold coin initiative.

Source:TheDotNews